Contract works insurance is an insurance policy that all banks and lenders are now asking for if you are a property developer or an individual doing a self-build and you are borrowing money, more than likely you will need a contract works insurance to satisfy the lender.
So, what exactly is contract works insurance and why do the lenders and banks ask for it? Contract works is an insurance policy that will be placed in your name which will give you full control over the insurance of the contract. It will not cover you for liabilities or JCT 21.2.1 insurance, but solely covers you for the cost of the contract which also includes the materials.
Why is Contract Works Insurance Needed?
Most lenders want this insurance in place as it works as a contingent insurance against the contractor. Basically, the lender is giving you large sums of money and they want to protect themselves as mush as possible and contract works insurance will give them this. The reason for this, is if the bank was reliant on the contractor’s policy, they have no control. For instance, the contractor could go, bust, the contractor might have defaulted on payments meaning they’ve had their policy cancelled midterm or the contractor’s policy could be littered with endorsements which would carry exclusions on claims re certain works carried out.
Contract works insurance is linked to the lender as they will request to be noted down on the policy document as a noted interest. As well as the bank or lender being noted, you as an employer will need to be heading the policy and have the building contractor noted down. Sometimes the Lender will take their noted interest a step further and will want to be noted as a First Loss Payee, which means in the event of a claim they have control of any pay-out.
If you are a property developer and the bank or a lender has asked you for contract works insurance cover, call us at Construction Insure as we are construction experts and specialise in property developers insurance, anothier important policy contractors all risk insurance, contract works insurance which are amongst many more we can provide cover for.