Construction Insurance: The Gaps Owners Discover After an Incident

Insurance is mentioned in one clause and verified almost never. The gaps that turn a manageable event into a personal liability.

Insurance appears in construction contracts as a single line requiring the contractor to maintain appropriate cover. It is rarely read, rarely verified and almost never tested until something happens, at which point the details decide who carries the loss.

Why these keep happening

These gaps share a single cause: insurance is treated as a document to be produced rather than a mechanism to be understood. Nobody checks what is covered, for how much, until when, or who can claim.

1. Never seeing the actual policy

A verbal assurance during negotiation feels sufficient, and asking for documents seems distrustful.

• Avoid it by: Require policy copies before mobilisation and confirm the period covers the full contract duration including extensions.
• Proof it is closed: Policy documents on file with expiry dates recorded and diarised.

What it costs you: After an incident, you discover the cover lapsed, excludes the relevant work, or does not exist at all.

2. Cover for a sum lower than the project value

The certificate shows a number and nobody compares it to the contract.

• Avoid it by: Check the insured sum against the full contract value plus materials on site.
• Proof it is closed: A recorded comparison between the insured sum and the contract value.

What it costs you: A partial loss is covered in proportion, leaving a shortfall that falls to whoever cannot avoid it.

3. No third party liability cover

Attention focuses on the works themselves rather than on neighbours and passers-by.

• Avoid it by: Require third party liability cover with a defined limit, alongside cover for the works.
• Proof it is closed: A third party liability policy with the limit stated and the period confirmed.

What it costs you: Damage to an adjacent property or injury to a third party becomes a direct dispute with no insurer involved.

4. Materials stored off site left uncovered

Cover is assumed to follow the material regardless of where it sits.

• Avoid it by: Either pay only on delivery to site, or require documented cover for off-site storage.
• Proof it is closed: A policy endorsement covering off-site materials, or a payment structure that avoids the exposure.

What it costs you: Material paid for but stored in a supplier's yard is lost in a fire or theft with no recourse.

5. The defects period left outside cover

Attention ends at handover, which is when most people consider the project finished.

• Avoid it by: Confirm whether the policy extends through the maintenance period and arrange cover for the building itself from handover.
• Proof it is closed: Written confirmation of cover through the defects period, and your own property insurance starting at handover.

What it costs you: Damage occurring during the defects period, or while remedial work is performed, falls into a gap between policies.

A short check before you sign

• Have you seen the policies, not just heard about them?
• Does the insured sum match the contract value plus materials?
• Is third party liability covered with a stated limit?
• Are off-site materials covered, or does your payment structure avoid the exposure?
• Is there cover through the defects period and from handover onward?

If it has already happened

If construction is already underway without verification, request the documents now and check the dates first, since lapsed cover is both the most common finding and the fastest to correct. Then compare the insured sum with the contract value, and arrange your own cover for the building from handover regardless of what the contractor holds.

If you are preparing to build, Domira can review your drawings, scope and contractor offers before you commit, and supervise delivery against the programme and specification you agreed.