Types of Construction Insurance.
The estimate of financial costs in an economic proposal includes the insurance cost and the financial cost itself.
This post examines the costs and types of insurances and sureties of the bond.
Insurance Requirements for Bid / Types of Construction Insurance
Time needed: 5 minutes.
- Determine what types of coverage the client requires
Tender documents should set out the type of insurance required by the customer, coverage and insured amounts.
The type of insurance to be included in the proposal is divided into tender guarantees and guarantees necessary for the performance of the contract.
We must ensure that there is no lack of any other insurance required under current labor laws.
The type of insurance currently used in the construction sector is summarized in the figure below:
- Confirm which insurance companies are accepted by the client
In most cases, in the tender documents, the buyer lists the authorized insurers.
If the information is not included in the tender documents, we should submit a written request to the client.
- Request quotation from authorized insurance companies
After defining all of the above, the final step is to ask for quotes from various insurance companies in order to choose the most convenient.
For the Insurance Company’s choice, not only should the price be evaluated, but also the certainty that the coverage includes all the risks to be covered.
To do so, it is convenient to seek the advice of a risk manager and an insurance consultant.
Policy: The policy is the document which gives the validity of the insurance agreement between the insured and the insurer. It sets out the requirements, rights and obligations of the parties involved.
Coverage: The insurance coverage is the commitment assumed by the insurer to pay an indemnity to the insured (or his/her beneficiaries), in order to repair the consequences of a loss.
It should be noted that the coverage has a limit known as the insured capital.
Premium: The insurance premium is the price of insurances, that is, the amount of money that the insured pays periodically to the insurance company for the coverage he receives by the insured risk.
Payment of the premium within the prescribed period obliges the insurer to comply with the service agreed with the insured.
A bid bond is a temporary guarantee that is returned to the bidder if their proposal is not accepted.
These bonds were returned to the unsuccessful bidders after the work was assigned to the winning bidder.
The bidder assigns the cost of these policies to overhead.
The usual insurance requirements include:
–Workplace accident insurance.
– Life insurance for workers.
-Civil responsibility for construction.
-Professional liability insurance.
-Contractors pollution liability (CPL)
– Business and commercial motor vehicle insurance.
-Contractors Equipment Insurance.
-Guarantee insurance to ensure compliance with the contract.
-Surety insurance to replace the retention with repair funds.
-Policy of guarantee for financial advance and/or collection.
-Construction and erection insurance during the execution of a project. All risk insurance.
-Any other insurance required by current labor legislation.
Generally, the Client requests that insurance policies include the following clauses:
Clause waiving subrogation by the insurer against the Client.
(Known as the non-repetition clause)
Clauses that prevent the insurer from modifying and/or canceling the insurances without prior notice to the Client.
We should note that the Client regularly monitors the validity of each of the policies required in the contract document.
The following post discusses the financial cost in construction projects.
Types of Construction Insurance – Calculate Man Hours.