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Insurance for construction projects

LEXGARANT Insurance Company offers the following types of insurance cover to enterprises engaged in construction:

  • - Construction insurance, including coverage of liability to third parties arising in the course of construction and assembly works;
  • - Machinery breakdown insurance;
  • - Electronic equipment insurance;
  • - Movable equipment insurance;
  • - Post-commissioning warranty liability insurance.

Turnkey construction projects require the supplier to fully design, construct and equip a manufacturing/ business/ service facility and turn the project over to the purchaser. The contractor bears responsibility for all stages of the project, for the entire period of the contract’s validity, including the post-launch warranty period for the operation of the equipment. The contractor of this type requires a beginning-to-end insurance cover (and even cover beyond to include shakedown or ‘snagging’ period where problems may be discovered in a newly built construction).

Design errors, equipment manufacturing and assembly/installation defects may not only cause a breakdown or an accident, but may even result in the complete loss of the equipment or some other property owned by an entity, which is located in close proximity to the facility or object subject of an accident, or even cause harm to life and health of physical persons.

Loss of, or damage to, equipment whilst being assembled and installed, may result in missed deadlines and require the contractor to manufacture/source replacement parts, these factors may considerably undermine the financial stability of the contractor.

Time is a critical factor in construction and deadlines will normally be stipulated in the construction contract. Time really does mean money and failure to meet deadlines may have serious implications as penalty clauses are built into the contracts. Both the penalty provisions and the costs of working overtime to try to catch up (known as increased costs of working) lead to serious financial consequences.

In designing a comprehensive insurance cover for companies engaged in construction works it is extremely important to provide a wide scope of protection, since in addition to the usual risks such as fires or natural disasters, the activities of the construction companies are subject to many specific hazards. Construction insurance programmes offered by LEXGARANT Insurance Company enable construction companies to wither all adverse factors.

The cost of insurance is included in the total cost of the contract and is charged to the client of the construction company.

What can be insured and what are the insurable risks?

1. Insurance of facilities under construction

This is one of the most substantial components of the overall insurance coverage of any construction business. The coverage applies to all stages of the construction process, from groundwork to commissioning stage.

2. Insurance of property located on the construction site

An accident on a construction site can damage property located on site. Thus, an insurance programme can only be considered truly comprehensive if it provides coverage for such events. The insurance company provides coverage for buildings and structures surrounding the facility under construction, or parts of buildings or structures not affected by the building works in the course of a reconstruction project, as well as other property owned by the insured or the customer.

3. Insurance of construction machinery and equipment

Construction machines and mechanisms, vehicles used inside the construction site and not allowed to operate on public roads are accepted for insurance. Damage to them due to an accident can cause significant damage and lead to downtime.

4. Insurance of temporary structures

Insurance of temporary structures includes insurance for temporary structures at a construction site, for example: office, changing rooms, hangars.

5. Insurance of objects for the period of warranty obligations

After the completion of construction and commissioning, the warranty period for the operation of the facility begins, it is usually 12 months. During that period the construction company is liable for any defects revealed in the course of the facility operation. LEXGARANT's policy covers any financial losses caused by the loss of, or damage to, the insured facility during the warranty period as a result of any defects or faults made during construction, installation and commissioning identified during the indemnity period.

6. Insurance of contractor's third-party liability

The insurance coverage applies to the liability for harm caused to the life, health or property of a third party, as a result of any incidents occurring during construction, assembly, adjustment and commissioning works, as well as during the warranty period.

Modified: 11:13:36 20.12.2021