Contract works insurance when you own the building

The builder's policy insures the builder. If the half-built works burn down, the person who paid for them is not automatically the person paid out.

If you are insuring a home or a car rather than a business, start here instead.

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What is contract works insurance, and do you need it if you own the building?

Quick answerContract works insurance pays to repair or rebuild a construction project that is damaged before it is finished. If you own the building or the land, the policy your builder holds is written for your builder. Whether it also pays you, and whether it covers the building that is already standing there, depends on whose name is on it and what has been added to it.

The short version

A contract works policy insures the works: the half-built structure, and the materials waiting on site to go into it.
The person the policy pays is the person named on it. A builder's policy names the builder.
Being named as an insured on the works policy is what puts you in the queue to be paid. Being told "we are insured" does not.
The building already standing there is a separate question again. Your own building policy insures it, and the works policy does not reach it unless the existing structure was deliberately brought inside the policy, with the exposure explained to the insurer, before work started. The joint between the two is where owners get caught.
The sum insured is not the only number that matters. An insurer generally prices from the full project value and then sets the sub-limits as a percentage of it, and if you want a sub-limit lifted you generally have to ask for it.
Your existing building policy has things to say about a building site: whether you told the insurer about the work, and whether the building empties out while it happens.
There are two ways this gets arranged. Your builder carries it, or you take out a policy for the one project. Both are normal. They are not the same for you, and we would generally tell an owner to take out their own.
Most of our clients are in Queensland, New South Wales and Victoria, and we work with businesses in every state.

Most owners land here at one of four moments. A builder has handed over a certificate and it names only the builder. A principal, a lender or the council has asked for proof of insurance before anyone can go on site. A renewal has come round in the middle of a job and nobody is sure what to tell the insurer. Or a contract is about to be signed and there is a clause about insurance in it that nobody has read properly.

This page is not a guide to running a construction business. If you build for a living, or you are a subcontractor working out whether the head contractor's policy reaches you, or you are an owner-builder in Queensland, construction insurance is written for you and answers all three. This page stays on the one question that page does not ask: what does an OWNER need, when somebody else is doing the building.

Whose name is on the policy, and why that is the whole game

An insurance policy is a contract with a named legal person. It pays that person. It does not pay whoever happens to have lost money.

That sentence sounds obvious written down, and it is the single most common way an owner ends up standing next to a burnt-out half-built extension with nothing to claim. The builder took out a contract works policy, exactly as the contract required. The builder is the insured. The builder's loss is the work they have done and not yet been paid for. Your loss is the money you have already handed over, the rent you are not collecting, and the finished building you were expecting. Those are different losses belonging to different people, and only one of those people is on the policy.

Getting your name onto the works policy is a normal thing to ask for and it is normally not difficult. On the contract works wordings we place, the owner or principal can be added as an insured party for their own interest in the works, so that the policy responds to the owner's loss as well as the builder's. What that gets you is standing: you become a person the insurer has agreed to pay, rather than a person hoping the builder passes the money on.

The cleanest version of this is the one we use on our own building work: the entity that owns the building is the insured, and the builder is listed as an interested party. That is the arrangement the right way round. The owner holds the policy and the builder is recognised on it, rather than the builder holding the policy and the owner hoping to be recognised on it.

Two further points that are easy to miss and expensive to miss.

A certificate is not the same as being named. A certificate of currency proves a policy exists and shows some of its terms. It does not prove you are on it. The thing worth reading on the certificate is the insured name, not the sum insured. What a certificate does and does not prove is set out in full in commercial lease insurance requirements, which is where that question lives on this site.

The name has to be the RIGHT name. This is not pedantry. Commercial buildings in Australia are usually held by a company, a family trust or a self managed super fund, and the person who signs the building contract is often a director or a trustee acting for one of those. A policy naming the human being when the trust owns the building names somebody who does not own the risk. William Paull's own observation, and he sees it constantly: "wrong names on policies, especially building owners, is very common". If the entity on your title is not the entity on your policy, that is worth fixing before the concrete goes down rather than after.

What a contract works policy actually covers

A contract works policy is built from two halves.

The first half insures the works. The structure going up, and the materials bought for it: what is on the site now, and on most wordings what is in transit to the site or in storage waiting to come. It responds to physical damage - fire, storm, flood, impact and theft - up to the sum insured shown on the policy.

The second half is liability during the works. A building site creates risks for people and property that are nothing to do with the building itself: the crane that swings into next door's fence, the excavation that undermines the footpath. The liability section of a contract works policy answers claims of that kind arising out of the construction work.

Four things sit around those two halves that an owner in particular needs to know about.

Existing structures. If the works are being done to a building that is already there - a fitout, a refurbishment, a new floor on an old shell - the existing building is not "the works". It is a separate thing that happens to be standing in the middle of the site. On the contract works wordings we place, the existing structure can be brought inside the policy as an extension, so that damage to the old building caused by the new work has somewhere to go. Two conditions come with it, and both are the reason this is a decision you make before the job rather than during it: the exposure has to be properly explained to the insurer, and the work must not have started yet. Once there are tradespeople on site, that door is generally closed. Where the extension is not taken, the existing building falls back to your own property policy, and the two policies then have to be read together rather than assumed to meet neatly.

The period of insurance. A single project contract works policy runs for a defined build period, not for a year, and an annual policy sets a maximum build period for each job it picks up. Weather, approvals and a supplier who does not deliver are the three ordinary reasons a job runs past it, and none of them extends the policy on their own. The moment a delay looks likely is the moment to tell the broker, because a project that runs out the far end of its own period of insurance is uninsured for the tail of the job.

The defects period after practical completion. A maintenance or defects liability period normally runs on past the day the job is handed over, and inside that window a fault that traces back to the construction itself can still be claimed. The wordings differ in a way that matters: "extended maintenance" and "guaranteed maintenance" are two genuinely different promises, and which one is on the schedule decides what is covered in that window.

The sub-limits, and the fact that nobody hands them to you. This is the part of a contract works policy that decides most arguments and almost nobody reads. The insurer generally does not want a long schedule of values from you. It wants one number, the full project value, and it then sets the individual sub-limits as a percentage of that number. Those percentages are the insurer's defaults. If you want a sub-limit higher than the default, you generally have to ask for it, and nothing on the schedule tells you that you should have.

On the half that insures the works, these are the sub-limits worth looking at before you accept a policy:

Existing structures. The big one on any job where a building is already standing, and it is the one most likely to be set far below what the old building is actually worth.
Principal supplied materials. Anything you buy and supply to the job yourself rather than leaving to the builder.
Variations and escalation. The buffer for a job that grows, which is the normal condition of a building job rather than the exception.
Removal of debris. What it costs to clear a damaged site before anybody can start again.
Professional fees. Re-drawing, re-certifying and re-approving after a loss.
Expediting costs and mitigation costs. Getting the job moving again, and limiting the damage while it is happening.

On the liability side, two are worth naming because a building job creates both and a default limit rarely reflects them:

Vibration, and the weakening or removal of support. The classic neighbouring-building claim, and the one that matters most where you are working alongside an occupied property.
Property in your care, custody and control. Someone else's property that is in your hands while the work is done.

None of this is exotic and none of it costs much to fix at the start. It is a conversation about the sub-limits before the policy is bound, and it is the single most useful thing an owner can ask for that a builder in a hurry will not ask for on their behalf.

What it does not cover, in plain words

The finished building, once it is finished. A contract works policy ends. From practical completion the building is an ordinary commercial building and needs an ordinary commercial building policy, sized to what it now costs to rebuild rather than to what it cost to build. That handover is a real gap owners fall into, and it is the reason commercial building insurance needs to be in place on the day the works policy stops.
The tools, the machinery and the plant used to do the work. Excavators, generators, scaffolding, site sheds. Those belong under plant and equipment insurance and they usually belong to the builder, not to you.
The builder failing. If the builder walks off, goes under, or simply does not finish, that is not physical damage and a contract works policy is not the answer to it. It is a contractual problem with a contractual solution, and it is worth understanding before you sign rather than after. What the policy decision does change is what happens next, and this is the most common way we see an owner get caught. Where the builder held the only policy and the builder goes under, the cover goes with them. The owner then has to arrange insurance on a site where construction has already begun, which is difficult and expensive, and no replacement builder will go near a part-built site unless somebody is insuring it. An owner who already holds the policy in their own name loses a builder. An owner who does not loses a builder and their cover on the same day.
Fixing faulty work itself. Where a defect in design, materials or workmanship causes damage, the policy generally will not pay to put the defective work right, though many wordings will still pay for the damage that defect goes on to cause to the rest of the project, provided the rest of the build was not itself defective. Where exactly that line falls is one of the most misread parts of the product and it is set out on the construction insurance page.
Money you lose because the building is late. Delay costs, lost rent while the job overruns, the tenant who walked: those are a different product. Business interruption insurance is where that conversation starts, and on a commercial building the rent side of it is covered on commercial landlord insurance.

The two ways it gets arranged, and what each one costs you

There are two normal shapes, and standard Australian building contracts make you pick one in the schedule at the back of the contract. It is one decision made at signing, and it decides who is protected by whose policy for the life of the job.

	Your builder's policy carries the job	You take out a policy for this one project
Who holds it	The builder, usually on an annual policy covering every job they start that year	You, the owner, for this project only
Who it pays	The builder. You are paid only if you have been added as an insured for your interest	You, directly
What you have to check	That the policy exists, that the sum insured reaches your contract value, that the build period covers your job, and that you are named on it	Far less. You are the insured, so the questions are about limits rather than about whose name it is
What happens if the builder's cover lapses	Your job goes uninsured and you may not find out until you ask	Nothing. Your policy is not tied to the builder's affairs
Existing building	Depends entirely on what the builder arranged and on whether they were asked to extend it to your existing structure, with the exposure explained to the insurer, before work started	You decide, because you are the one buying it
The sub-limits	The builder's defaults, chosen for the builder's business rather than for your building. Existing structures is the one that bites	Yours to set. You can ask for the ones that matter on your job to be lifted
If the builder goes under	The cover goes with them, on a site where work has already begun	Your policy is not tied to the builder's affairs, and a replacement builder has something to work with
What it costs you	Nothing directly. It is inside the builder's price	A premium you pay, and the cost of the builder's cover should come out of the construction contract by the same amount
What we would generally recommend	Where you have looked at the policy and it genuinely fits your job	This one. Not because of the size of the job, but because it is the only version where you know what you have got

Our position, and it is a recommendation rather than a description. What we usually see is the builder arranging the cover, and what we would usually advise is the opposite. Take out the policy yourself, and have the cost of the builder's cover taken out of the construction contract, so you are not paying for it twice. What that buys you is knowledge and control: you know what the sum insured is, you know what the sub-limits are, you know the period covers your job, and you can have all three changed when the job changes.

There is no size of job at which this starts to matter. In our experience it matters most at the moment for a reason that has nothing to do with insurance: we are seeing builders go under, and an owner whose cover disappeared with their builder is left looking for an insurer to take on a half-finished site. In our experience that cover is harder to find and dearer when it is found. That is avoidable, and the place to avoid it is at the start, by being the one who holds the policy.

The version that goes wrong is the third one, which is nobody deciding: the contract says the builder will insure, nobody checks what the builder actually bought, and the answer arrives in the form of a loss.

Your existing building policy while the works are running

This is the part written for you and for nobody else on the site, and it is the part almost no page in Australia bothers with. You already own a building. It is already insured. You are about to fill it with tradespeople.

Tell your insurer about the work. Building work changes the risk at the address, and an insurer that first hears about it from a loss assessor is an insurer with an argument available to it. This is not just good practice: the commercial building wordings we place carry a condition requiring you to tell the insurer before alterations or building work begin. It is a two minute phone call, and it removes one of the most common arguments an insurer can raise at claim time.

Watch the vacancy clock, because a refurbishment empties a building out. Most commercial building policies have an unoccupancy condition, commonly 60-90 consecutive days, after which cover is restricted unless the insurer has agreed otherwise, and it resumes automatically once the premises is occupied again. A narrow set of perils survives the exclusion, but the general position is that an empty building past the vacancy limit is an uninsured building. A fitout between tenants, a refurbishment that runs long, a building emptied out to be worked on: all three can put a tenanted commercial building past the limit without anybody noticing, because nobody thinks of a building full of tradespeople as unoccupied. There is a second, tighter clock for landlords: a glass benefit in vacant rentable areas can fall away after 60 days without the insurer's written agreement. Two clocks, two lengths, and the shorter one is the one people miss.

Check that the sum insured still describes the building. A completed extension is a bigger building than the one on your schedule. The moment the works finish, the rebuild cost of what stands there has changed, and a sum insured that was right in March is not right in November. That is worth settling on the day the job finishes rather than at the next renewal.

And a claim can outlive the works by years. A decision made during your building work can attach to you long after the builders have gone: in one leading Australian case the building's former owners paid personally, years after they had leased the premises out and moved on, for a handrail that was never fitted during their own renovation. That is set out in full on property owners liability, which is the cover it argues for.

What a claim on a half-built job actually looks like

Three things decide it, and only one of them is the policy wording.

Who is claiming. The first question an insurer asks is whether the person in front of them is an insured under the policy. That is decided months earlier, when the schedule was filled in, and it cannot be fixed after the loss.

What was damaged, and which policy owns it. On a job with an existing building, a fire does not politely stop at the line between the new work and the old structure. Where the existing building sits inside the works policy as an extension, one insurer handles the lot. Where it does not, there are two policies, two excesses and two loss adjusters, and the argument is about which side of the line each item of damage fell on. That argument is avoidable, and the place to avoid it is at the start: the exposure has to be explained to the insurer, and the extension cannot be added once the job is running.

Whether the sum insured on the works reaches the true value of the works. Contract works policies carry the same underinsurance mechanic as building policies. On a partial loss, most wordings test the sum insured against at least 80 per cent of the true value of the works, and where the figure falls short, the payment is reduced in proportion to the shortfall. On a total loss there is nothing to argue about: the insurer pays the sum insured in full, and the owner then discovers that the sum insured does not finish the job. The arithmetic behind both is on the co-insurance clause explained.

The figure that goes stale here is the contract value. A contract signed at one number and varied three times upwards during the job is a contract whose insurance was bought against the first number. Most policies build in some automatic increase to the sum insured, commonly around 15 per cent of the contract value, which is a buffer against ordinary drift rather than a promise that the cover keeps pace with a job that has grown further than that. Every variation you sign is a reason to check the number, and it is a five minute job at the time and a very expensive one afterwards.

What we ask an owner first

When an owner rings about a job, the conversation starts in the same place every time.

Has construction begun? This is the first question, and it is first for a reason. What can be arranged, and whether the existing building can be brought inside the policy at all, changes the day work starts.
What is the address of the site?
What is actually happening on site?
Tell us about the project. Not the paperwork. What is being built, why, and what it needs to be when it is finished.
What is the project cost?
How long is the construction period?

None of those questions needs you to have read your policy first. The point of asking them is that the answers usually decide the cover before anybody looks at a wording, and the first one decides whether there is still a choice to make.

What we do not do is tell you what to agree with your builder or your lender. That is a commercial decision and it is yours. What we can do is read what you are being asked to sign, tell you plainly what it does and does not protect you against, and put the cover in place around it.

If you have the building contract or the builder's certificate in front of you, ring 07 3292 1111 and we will read it with you.

Common questions

Contract Works Insurance for Building Owners: your questions answered

My builder has told me they are insured. Is that enough for me?

It proves a policy exists. It does not prove the policy pays you. A builder's contract works policy names the builder as the insured, and an insurer pays the person named on the contract. If the half-built works are destroyed, the builder's loss is the work done and not yet paid for, and yours is the money already handed over and the building you were expecting: two different losses belonging to two different people. Ask for the certificate, and read the insured name on it before you read anything else. If your name or your company's name is not there, that is the conversation to have before work starts rather than after a loss.

Whose name should be on the contract works policy when I own the building?

The entity that actually owns the building or the land, spelt the way it appears on the title, with the builder listed as an interested party. That is the arrangement we use on our own building work. Commercial property in Australia is commonly held by a company, a family trust or a self managed super fund, and the person who signs the building contract is often a director or trustee acting for one of those rather than in their own right. A policy naming the individual when the trust owns the asset names somebody who does not own the risk, and a claim can fail for that reason alone even though the loss is completely genuine. Wrong names on policies, especially building owners, is one of the most common defects we see.

Do I need to tell my insurer that I am having work done on a building I already insure?

Yes, and it costs you nothing to do it. Building work changes the risk at the address: there are people on site who do not normally work there, the building may be open where it was sealed, and hot work and heavy equipment may be involved. The commercial building wordings we place carry a condition requiring you to tell the insurer before alterations or building work begin, and separately, anything that materially changes the risk is the kind of thing an insurer is entitled to be told about. An insurer that first learns about the work from a loss assessor has an argument available to it that it would not otherwise have had. One phone call before the job starts removes one of the most common arguments an insurer can raise at claim time.

Who insures the existing building while the works are going on?

You still do, through your own commercial building policy, unless the existing structure has been deliberately brought inside the works policy. On the contract works wordings we place that extension is available, so damage to the old building caused by the new work has somewhere clear to go, but two conditions come with it: the exposure has to be explained to the insurer, and the work must not have started yet. Once there are tradespeople on site, that door is generally closed. Where the extension is not taken, there are two policies covering one site, and at claim time there are two insurers and two excesses arguing about which side of the line the damage fell on. Whether it is worth taking depends on how much of the existing building is exposed to the work, and it is worth asking what the sub-limit on it actually is, because the default is often well short of what the old building is worth.

My building will be empty while the works are done. Does that affect my cover?

It can, and this is the trap that catches owners who have done everything else right. Most commercial building policies have an unoccupancy condition, commonly 60-90 consecutive days, after which cover is restricted unless the insurer has agreed otherwise, with only a narrow set of perils surviving, and it resumes automatically once the premises is occupied again. A refurbishment between tenants is exactly the situation that runs past the limit without anybody counting, because a building full of tradespeople does not feel unoccupied. There is a second and shorter clock as well: a landlord glass benefit in vacant rentable areas can fall away after 60 days without the insurer's written agreement. Tell your insurer the building is coming empty, before it does.

Does contract works insurance pay if the builder walks off the job or goes under?

No. Contract works insurance covers physical damage to the works: fire, storm, flood, impact, theft. A builder failing to finish is not physical damage, so no contract works policy responds to it. That is a contractual and commercial problem, and the protections available depend on the kind of work, who is doing it and what the contract says. In Queensland, the QBCC's Home Warranty Insurance scheme covers a specific and narrow case, and it is not this one for most commercial work: what that scheme does and does not do is set out on our construction insurance page. What the insurance decision does change is what happens next, and it is the most common way we see an owner caught out. If the builder held the only policy, the cover goes when the builder does, on a site where work has already begun, and finding an insurer willing to take on a half-finished project is both difficult and expensive. No replacement builder will start work on an uninsured site either. An owner who holds the policy in their own name loses a builder. An owner who does not loses a builder and their insurance on the same day. The practical point is that this is decided before the contract is signed, because there is nothing to buy after it.

Someone has asked me for proof of insurance before work can start. What do they actually want?

Almost always a certificate of currency from the insurer. Read the insured name on it first, because a certificate that names only the builder is telling you something important about who gets paid. What a certificate of currency does and does not prove, and how it differs from a certificate of insurance, is set out in full in our guide to commercial lease insurance requirements.

Is contract works insurance the same as construction insurance?

They are two names for substantially the same cover, and you will see both. The difference that matters is not the name, it is who is buying it and why: a builder buys it to protect a business that builds, and a building owner buys it, or gets named on someone else's, to protect the money going into a project. Our construction insurance page is written for the builder and the subcontractor; this page is written for the owner.

Where to go next

Have the cover on your job read before the first day on site

Send us the building contract and whatever certificate you have been given. We read who is named, what the sum insured reaches and how long the cover runs, and tell you plainly what it protects you against and what it does not. If something needs fixing you get real options priced against several insurers competing for it rather than a single number, with nothing decided on the spot. There is no fee for the review itself and no obligation to move your policy anywhere afterwards. Answered 24 hours a day: a broker in office hours (8am–6pm Mon–Fri), and after hours we take your details and a broker rings you back from 8am on the next business day.

Call now, most enquiries are settled in one conversation - or leave your details and we'll ring within 90 minutes on a new enquiry (8am–6pm Mon–Fri).