What’s Wrap-Up Insurance and Do I need It?
If you are a contractor, your contractor’s insurance protects you from major losses when something goes wrong. Although your contractor’s insurance covers many elements of your work and business, you need to consider additional coverage when you win contracts for major projects costing over $10 million.
Wrap-up insurance is the ideal liability policy that ensures your coverage encompasses everything you need on those multi-million-dollar jobs. If you are primed to take on major projects, it’s time to start considering wrap-up insurance.
Here we review wrap-up insurance and why you need it for your business.
The Basic Types of Wrap-up Insurance
There are two types of wrap-up insurance:
1. Owner Controlled Insurance Program (OCIP)
This is sponsored and controlled by the owner. The general contractor, subcontractors, and other participants are insured under the policy.
2. Contractor Controlled Insurance Program (CCIP)
In this case, the general contractor sponsors and controls the policy, subcontractors, and other participants are insured under the policy. The policy can then include the project owner either as an additional insured or named insured on the policy.
As a contractor, if you opt for CCIP, the pressure is on because you retain financial risk for the project instead of the owner.
Understanding Wrap-Up Insurance
Your wrap-up insurance policy provides blanket coverage, protecting owners, contractors, and subcontractors. It’s the easiest way to provide peace of mind as everyone involved reduces their worries regarding what is covered and what isn’t covered under their policies.
Instead, one policy avoids potential gaps often found when each party has a separate policy. Although it might seem multiple policies means more coverage, often coverage has insufficient limits that put both parties at risk. With one all-encompassing policy, everyone reduces their risk and can be confident they have more than adequate coverage.
Why Wrap-Up Insurance isn’t More Expensive
Some contractors or owners fear adding wrap-up insurance makes everything more expensive. However, your collective insurance covers all forms of necessary add-ons, such as:
- General liability
- Excess liability
- Pollution liability
- Professional liability
- Builder’s risk
- Railroad protective liability
With so much additional coverage, the cost can be split between all parties, making it a more affordable prospect.
What Wrap-Up Insurance Can Cover
As with any insurance, wrap-up insurance varies from policy to policy. However, they commonly include:
- General Liability with a Broad Form Endorsement covers bodily injury against third-party injuries on the site, injuries resulting from work-related activities by the contractor, subcontractor, or owner and third-party property damage caused by those named on the policy.
- Builders Risk covers water, weather, and fire damages during construction.
- Umbrella Liability provides complete coverage beyond your general liability policy with higher limits that can be as much as several millions of dollars.
- Workers’ Compensation for injured workers enrolled with contractors or subcontractors on the project.
Commercial Vehicle insurance for cars, vans, trucks, or specialty vehicles to cover property damage and liability claims.
- Property Damage for all parties, equipment floaters for specialized equipment and tools transported to and from the job site.
Specialty or custom needs can also be added to cover things like equipment, location considerations, etc.
The Benefits of Wrap-up Insurance
There are many benefits to wrap-up insurance, including:
1. Potential cost savings
As mentioned, you can see cost savings if you opt to split costs with the other parties. However, you might also see discounts for insurance across the project offered by some insurance companies.
2. Consolidated coverage
As the controlling entity, you have more control over the scope of coverage.
3. Higher limits
In most cases, you will have higher limits, which means better coverage and less chance of being left footing the bill for the difference.
4. Centralized safety and risk management
Safety and risk management services tend to become more centralized due to shared coverage. This results in fewer injuries and reduced severity of injuries, which costs the project less money in the long run.
5. Efficient processing
Filing a claim becomes easier as all parties involved are on the same program and policy. This reduces touch points and red tape, allowing for smoother processing and quicker access to funds.
6. Reduced disputes
As with the above, because you are all on one policy, disputes will be reduced. There will also be less chance of subrogation issues between insureds and insurance carriers for what is covered on the site.
It’s not uncommon for companies with a wrap-up program to find they have better business networks and even enhanced brand value. This allows you to be considered for more large-scale projects with higher profile partners.
Potential Pitfalls of Wrap-up Insurance
Wrap-up programs could lead to inheriting more administrative work. Depending on your current office set-up, this could make it difficult to manage duties, such as reviewing and approving documents for claims and meeting with underwriters.
Hiring an individual to manage this can be costly and could prove unnecessary. It takes some planning and consideration as to whether you have someone to whom you can designate these additional duties, instead of finding the budget to hire a new administrator.
Wrap-up insurance provides the complete coverage you need to avoid facing costs that could ruin your company.
If you would like more information on wrap-up insurance, call Goodison Insurance at 905-451-1236 or contact us here.