Project Loss Insurance: What Contractors Need to Know
Could a catastrophic failure on a single project create a large-scale challenge for your company’s equity? A new product is set to be released that can protect a contractor’s balance sheet from risks that have been uninsurable up until now.
Construction projects are very risky for even the best contractors. A sizeable loss on a project can lead to damaging business impairment or worse – complete failure.
The loss of business assets, and, perhaps even personal assets often tied to company worth, is beyond devastating to the firm’s owners and employees and their families. However, a new product is on the horizon that can protect you and your organization from this risk.
What is project loss insurance?
Contractors already have property & casualty insurance to handle losses stemming from large fire, general/auto liability, and workers’ compensation for their injured employees. It’s critical to evaluate further protection that may be needed to eliminate financial risks contractors face when they take on a project.
Project loss insurance (PLI) is designed to reduce the often overlooked risks of a catastrophic project loss. The intent of the policy is to help contractors survive the loss without losing their business assets or, tragically, the company as a whole.
PLI can help contractors handle severe financial losses associated with factors like:
- Bad estimates
- Poor production
- Subcontractor failure/default
- Delay damages
- Price escalations
- Manufacturer/supplier failure
Key facts about project loss insurance
- PLI offers significant self- insured retention to handle catastrophic financial losses.
- Contract limit of liability is based upon your average and largest projects.
- Contractor shares in the loss with a carrier so you are “rowing along with them” to handle the loss. Typically, a contractor pays 25% and the carrier will pay 75% of the funds needed up to contract limit.
- Premium rates are determined per $1,000 of revenue for newly-enrolled projects and billed quarterly.
- The underwriting process is a 27 question PLI application and a surety application for applicants not currently bonded by the carrier.
The carrier behind project loss insurance has vocalized their desire to insure contractors who have “both hands on the wheel”. In addition, they intend to work with those clients to help improve financial reporting and internal controls.
The mutual shared goal between the carrier and contractor? Better prevent and manage catastrophic losses and improve overall operations.
The M3 Construction and Real Estate team is prepared to introduce interested contractors to this impactful insurance protection. We know you will have questions. We have solutions.