Navigating the ins and outs of construction projects can be difficult, especially when it comes to managing risks. That’s where construction wrap-up insurance, known as “wraps” for short, comes in. Wrap-up insurance can cover a construction project from start to finish, helping to neatly bundle your commercial insurance needs while potentially cutting down on costs. In this article, we’ll explore what wrap-up insurance coverage entails, the types of protection it may offer and potential benefits and drawbacks of wraps.
What is wrap-up insurance?
Wrap-up insurance is a specialized type of insurance program that’s specifically designed for construction projects. It can help simplify construction insurance by bringing protection for the owner, general contractor and subcontractors under one policy. In doing so, wraps may help reduce costs and administrative burdens without sacrificing the coverage needed for the project and the involved parties.
Who needs wrap-up insurance?
Wrap insurance is generally designed for larger projects that have multiple parties involved. It may be particularly beneficial for:
- Project owners and developers who want to protect their project without relying on the insurance policies of their contractors and subcontractors.
- General contractors seeking to streamline insurance processes and coverages for themselves and their subcontractors.
- Subcontractors who may not otherwise be able to afford or obtain the level of coverage provided under a wrap program.
Types of Wrap-Up Insurance
There are several types of wrap-up insurance programs, each tailored to fit the specific needs of a project and its stakeholders.
- Owner-Controlled Insurance Program (OCIP): Managed by the project owner, OCIPs can provide insurance coverage for contractors and subcontractors involved in a project. This approach might be used by large-scale projects in which the owner wants direct control over the insurance coverage to ensure that all contractors and subcontractors have uniform coverage.
- Contractor-Controlled Insurance Program (CCIP): With a CCIP, the general contractor can sponsor the insurance and extend coverage to subcontractors. This type of policy is more common for projects in which the general contractor has a significant role or those in which the owner prefers not to manage the project’s insurance.
- General Liability Only Program: This type of insurance program focuses solely on providing general liability coverage for the project, which may allow for a more targeted approach to managing the most common risks associated with construction activities. Owners, contractors or subcontractors may secure additional coverage to help cover more complex risks not included in a general liability policy.
- Workers’ Compensation Only Program: These programs offer coverage specifically for workers’ compensation claims. This can help ensure that all workers have access to compensation for medical expenses and lost wages should they become injured. Like with a general liability program, the involved parties may need additional forms of coverage.
- Rolling Wrap-Up Program (ROCIP/RCCIP): With both OCIP and CCIP options, rolling wrap-ups can allow for continuous coverage across multiple projects, which can be beneficial for property developers or contractors with ongoing construction activities. This type of program can provide a more standardized insurance solution that can adapt to different projects without the need to negotiate terms for each new project.
Potential Coverages in a Wrap-Up Insurance Policy
Generally speaking, wrap-up insurance allows for multiple areas of exposure to be consolidated into a single policy for multiple parties. These exposures may include:
- Bodily injury to third parties during construction or after project completion
- Bodily injury to workers on-site
- Property damage to third parties during construction or after project completion
- Property damage to the completed project
- Environmental liability: Bodily injury, property damage and clean-up costs
While wraps can be highly variable depending on the needs of the owner and contractors, OCIP or CCIP coverage usually includes general liability insurance and workers’ compensation insurance. Additional coverages may include excess liability, builders’ risk insurance, professional liability insurance and subcontractor default insurance, to name a few. It’s important to note that wraps generally do not include commercial auto insurance, surety bonds, employment practices liability insurance or coverage for off-site contractors and third parties.
Benefits of Wrap-Up Insurance
Wrap-up insurance may provide a comprehensive solution for the insurance complexities of construction projects. By centralizing coverage into a single policy, it can provide several key benefits, such as:
- Cost Efficiency: By pooling coverage for multiple parties, wrap-up insurance may lead to savings on premiums.
- Simplified Claims Administration: Managing one policy for all parties may reduce paperwork and create an expedited, simpler claims process.
- Enhanced Coverage: Wrap policies can provide broader coverage options that might be unavailable or prohibitively expensive for individual parties.
- Worker Safety: A wrap policy can help establish uniform risk management standards for all contractors, helping to facilitate a safer work environment.
Disadvantages of Wraps
While a wrap-up insurance policy may provide substantial benefits for large projects, it can also come with challenges that potential policyholders should consider. These include:
- Complex Setup: Establishing a wrap-up insurance program can be complex and may require outside guidance, meaning that it may not be a feasible option for smaller operations or short-term projects.
- Potential Coverage Gaps: While wrap-up insurance is designed to be more comprehensive than traditional insurance policies, it likely won’t cover every risk you might face during the project. Make sure to carefully review your wrap policy with your insurance broker to help ensure that you have adequate protection.
- Control Issues: For subcontractors, being under a policy that’s controlled by another party could lead to concerns over claims handling and coverage specifics.
Need help securing construction wrap-up insurance?
Securing the right wrap-up insurance package for your construction project may require navigating a complex landscape of coverage limits, liability risks and policy coverages. Higginbotham is here to help simplify this process for you with tailored insurance solutions backed by year-round service and support. If you’re looking to streamline your construction insurance needs, reach out to a member of our team.
