During a construction project, a number of risks can arise. Property owners have several insurance options available to manage risks. There are three major types of insurance policies available to make sure that you are covered: Owner’s Interest Policies, Owners and Contractors Policies and Owner Controlled Insurance Policies, which are also called Wrap-Up policies. Each type offers different levels and degrees of coverage.
Owner’s Interest Policies
Owner’s Interest Policies (OIP), as the name suggests, protect the property owner’s interests. An OIP is a general liability policy that covers any vicarious liability a property owner might run into that is in excess of what the contractor or construction manager’s policy will cover. Excess policies can also be purchased if you need to increase your current amount of OIP coverage. This allows you to get exactly the coverage that you need to fit your budget and assure that you are well-protected.
Owners and Contractors Protective Liability Coverage
This type of policy, often referred to as OPC, is a very limited type of insurance which applies only to the project owner who hires a contractor. Under this sort of policy, the person or company insured is protected only from liability associated with the contractor who is designated in the policy. Additionally, the property owner is only covered from liability that arises from omissions or acts in the general supervision of the contractor at the location that is named in the policy.
In most cases, excess coverage is not purchased on top of an OPC. There is no coverage from property damage or bodily injury if they occur before or after the designated contractor is working on the property. Because of the limitations, this is not appropriate for everyone.
An Owner Controlled Insurance Policy (OCIP), colloquially known as a wrap up policy, is the most comprehensive of the three. A property owner purchases this policy to cover everything instead of contractors taking out their own liability and worker’s compensation insurance.
This sort of insurance is sold on the principle that it costs less to buy insurance in bulk than buying it piecemeal. However, if you do not need all of the coverage available in an OCIP, you could wind up paying for insurance you do not need. The contract also has some intricacies. The owner will need to have each contractor reveal the cost of insurance for their participation in the project; the owner then deducts that amount from the contractor’s bid and writes the contract without the insurance costs included.
Large excess limits can be purchased with this sort of policy. Both general liability and worker’s comp can be included.
By carefully assessing how much coverage you may need and what you need covered, you can make a decision that is economical while keeping you fully protected. Talk to your agent about how you can be sure that you are buying the right policy for your needs.