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What Is Wrap-Up Insurance?

Whether it's a newly-built, additional, or huge renovation, wrap-up liability insurance or wrap-up insurance for your construction projects is a significant way to protect against property damage or bodily injury to third party individuals or entities that could occur during a construction project.

Construction activities are being done almost everywhere. When it's happening in and around highly-populated areas, it is important to know how wrap-up liability insurance works for construction projects.

Wrapup insurance is a type of liability policy that serves as all-encompassing insurance, which protects all contractors and subcontractors working on huge projects amounting to over 10 million dollars. The two kinds of wrap-up insurance are: owner-controlled and contractor-controlled.

Owner-controlled insurance

This type of wrap-up insurance is set up by the project's owner to benefit the contractor to cover all listed contractors. Meanwhile, the general contractor may use a contractor-controlled insurance program to reach coverage to all the contractors and subcontractors engaged in the project.

Understanding Wrap-Up Insurance

Wrap-up insurance is designed for bigger construction projects. A wrap-up insurance policy aims to provide peace of mind that everyone involved in a project is properly insured. Wrap-up insurance is a comprehensive blanket coverage that protects the owner, contractors, and subcontractors. Wrap-up insurance is necessary because it avoids every contractor and subcontractor's need to get their own liability insurance. There might be coverage gaps or insufficient limits if there were several policies in place. Instead, wrap-up insurance is more effective at guaranteeing that all of the liability hazards are covered appropriately.

For example, consider an owner-controlled insurance program obtained by the owner on the builder or contractor's account. Including add-ons, the insurance covers workers' wages, general liability, professional liability, excess liability, builder's risk, pollution liability, and railroad protective liability. While wrap-up insurance prices can be high, the cost can be divided among the general contractors and sub-contractors.

Types of Wrap-Up Insurance Coverage

Wrap insurance covers several risks for you, your project, and your workers. Policies can vary but may include:

General Liability with a Broad Form Endorsement

This coverage includes all liabilities for a project, including bodily injury coverage against third-party that happen on the site or if those injuries result from work-related activities by the contractor, subcontractor, or owner. Also, it protects the third-party property against harm caused by anyone insured under the policy.

Builders Risk 

Builders risk provides coverage for any weather, water, and fire damages to a structure under construction. In other words, builders' risk is basically the same as property insurance, except this covers structures under construction.

Umbrella Liability 

Umbrella insurance covers beyond the limit for a general liability policy. For instance, let us say a general liability policy covers up to $2 million in losses and the umbrella liability policy grants $10 million in coverage. If there were an $8 million claim, the general coverage would provide coverage for the first $2 million, while the umbrella policy would have the remaining $6 million covered from the claim.

Workers' Compensation

This type of wrap-up liability insurance covers workers' compensation to all employed contractors or subcontractors on the project.

Commercial Vehicle

Commercial vehicle insurance covers vans, trucks, cars, or specialty vehicles used on the building project against liability claims and property loss.

Property Damage

This provides coverage for property damage of all the parties named on your policy. Also, inland marine insurance for tools and equipment that have been transported to and from the job site and equipment floaters for specialized equipment and tools can be added.

Benefits Of Wrap-up Liability Coverage 

  • For Construction Projects When Purchased By Contractors

The business owner (lead or general contractor) obtains wrap-up liability insurance for construction projects for all contractors and subcontractors included in a construction project. Buying wrap-up liability insurance for all participants' construction projects provides peace of mind that proper insurance is in place for every individual involved. Also, by having a separate insurance carrier for the project, the risk of claims is lower, and claim resolution tends to be less costly. When contractors buy wrap-up liability insurance for a specific project, it helps keep their operating commercial general liability-free from losses. This can be particularly useful for higher-risk projects.

Benefits Of Wrap-up Liability Insurance For Construction Projects When Purchased By The Property Owner

General contractors generally do and should carry commercial general liability coverage for their works and their subcontractors' work, so having the general contractor place wrap-up liability insurance for construction projects on each project can be redundant and increase the project expense. However, if the property owner purchases wrap-up liability insurance for construction projects, the policy is in their name. The limits of that policy are dedicated to the owner and not shared by all the parties involved. When the property owner acquires the policy themselves, they shun from any markups or insurance overcharges that a contractor might add in their project pricing.

Wrap-up Liability Policy

Who is Insured?

The policy is usually arranged, paid for and controlled by the owner or contractor; but it insures the following individuals as Named or Additional Insureds concerning the project: 

  • General contractor 
  • Sub-contractors 
  • Owner 
  • Engineers, Consultants, and Architects (subject to our professional liability exclusion) 
  • Project manager 



Parties not insured: 

  • Suppliers and security protection firms 



The advantages of a wrap-up policy: 

  • Coverage uniformity; the owner and all contractors are insured in one policy by one insurance company
  • Lower cost (compared to when each contractor obtained their own insurance)
  • Easier administration of the insurance requirements as the general contractor doesn't need to monitor all subcontractors to guarantee their separate policies conform and remain in force 
  • Guarantees coverage will stay in place for the project for the completed operations period
  • Avoids disputes between policies and insurance companies when more than one contractor is involved in a loss 

Disadvantages

The coverage is not as broad as a standard CGL wrap-up that completely excludes the project's damage in the completed operations phase to avoid long tail construction defect exposure. Nevertheless, a standard CGL grants coverage in the completed operations phase for damage to work done on the insured's behalf by subcontractors. As the wrap-up is project-specific, contractors still require CGL coverage to insure their other operations and past work.

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