Insurances Flashcards
1
Q
Construction Insurance linked with Risk Management
A
- insurance is one of several things a contractor can do under s more general heading of ‘Risk Management’
Risk: potential inadequacy or loss
Insurance: applies to the risks that cause financial loss
2
Q
5 Steps for Risk Management
A
- recognize and identify various risks
- identify risk exposure (ie probabilities of events their estimates losses)
- decide how to protect against identified risks
- option 1: elimination
- option 2: assume the risk
- option 3: get insurance - conduct company wide program of loss control and prevention
- monitor the results
3
Q
Construction risks
A
- construction work involves various uncertainties (property-related and liability-related risks)
- construction work is hazardous (worker-related risks)
- contracts typically include (financial) indemnification clauses for owner (contractor assumes legal liability for construction owners
- insurance program covers contractor
4
Q
Insurance for Risk Management
A
- insurance doesnt eliminate the risks involved in construction contracting, but shifts most of potential financial burden to professional risk-bearer
- insurance companies PAY FOR LOSSES and work along side construction companies to help w RISK MANAGEMENT:
– safety appraisals
– loss prevention
– education and training programs
– site inspection
5
Q
Why use insurance?
A
- owner reuqires it
- cover risk which could cause serious monetary damage to contractor
- much of its required by law (eg workers compensation)
- to have insurance company’s attorneys defend one in court
6
Q
Insurance Policy
A
- TWO-PARTY contract where:
– insurer assumes financial responsibility for potential loss
– insured pays premium, which is for a consideration - policy usually requires premium paid in advance of protection
- if loss covered by insurance polity, contractor cant recover more than the loss
- premiums of insurance types can b adjusted according to contractor’s loss experience record
7
Q
Contract Requirements
A
- contratcor usually required to be responsible for workers’ compensation by law
- most contracts specify a lower limit on coverage
- contractor must show insurance certificates to A/E and owner
- contractor should seek advice from insurance agents(BEFORE BID) as to :
– WHAT KIND OF INSURANCE IS REQUIRED BY CONTRACT
– NO HOLES AND OVERLAP
8
Q
3 Major Types of Construction Insurances
A
- Property Insurance
- Liability Insurance
- Worker Insurance
9
Q
Property Insurance - #1. Project Property
A
- protects project against losses from fire, smoke, explosion, collapse, vandalism, etc
- project insurance must be purchased and maintained on entire project to full insurable value
- owner, contractor, subs, and material suppliers have to be covered against losses
- property insurance must be tailored to risks of specified project
10
Q
Property Insurance - #2. Builder’s Risk (BR)
A
- BR is stanadard policy on building construction
Excludes:
– land preparation, landscaping, excavation etc so usually not used by highway contractors
– loss/damage caused by error, omission or deficiency in design, specifications, workmanship or materials - premium rates can vary with: type of construction, availability of fire-fighting facitilities
11
Q
Property Insurance - #3. All-Risk Builder’s Risk
A
- covers all risks (project property, temporary structure, materials, supplies)
- covers all direct physical loss except: freezing, settlement, floods etc (but exclusion can be removed for additional premium)
- all-risk policies are flexible and can vary: contractor should be able to select specific coverages to suit needs (so consultation w insurance professionals needed)
12
Q
Property Insurance - #4. Named-Peril Builder’s Risk
A
- covers only named losses
- addiitonal premium paid for each coverage
13
Q
Property Insurance - #5. Equipment Floater Policy
A
- contractor procures to protect their construction equipment from loss/damage
- doesn’t provide liability coverage for damage done to others
- insurance can b obtained on named-peril or all-risk basis
14
Q
Liability Insurance
A
- liability is an obligation imposed by law (holds independent contractor liable for damages due to own acts of omission/commission)
- contract by which insurer promises to: compensate the insured if they suffer loss from specified causes, OR guarantee, indemnity, or secure insured against loss from that cause
15
Q
Liability Insurance - #1. Professional Liability (Errors & Omissions)
A
- coverage for damages arising from professinoal or quasi professional’s negligence, mistakes, or failure to take appropriate action in performance of business
- contractors must but when doing design (eg. design-build)
