Commercial construction insurance covers builders, developers and contractors working on non-residential projects including office buildings, retail centres, industrial facilities, hospitality venues, healthcare and educational buildings. The insurance principles are the same as standard contract works insurance, but commercial projects introduce additional complexity in terms of scale, contractual requirements and risk profile.
This guide covers the key considerations for insuring commercial construction projects in Australia, including who arranges the insurance, what is covered, and how commercial policies differ from residential cover.
Fitout projects involve constructing or refurbishing the interior of an existing commercial building. Contract works insurance for fitouts covers the new works being installed, along with liability for damage to the landlord's building or neighbouring tenancies. A common scenario: a builder completing a $800,000 office fitout in a CBD high-rise needs cover not just for the fitout works, but also for potential damage to the base building's services, lifts and common areas during construction.
Shopping centres, restaurants, hotels and entertainment venues require contract works cover during construction. These projects often involve working within or adjacent to operating businesses, creating third-party exposure that needs careful management. The liability section of the policy is particularly important for projects where the public may be present nearby.
Factory buildings, warehouses, cold storage facilities and distribution centres present their own risk profile. The high value of structural steel, the use of cranes and heavy plant, and the scale of these projects all affect the insurance approach. Cover for delay in start-up or advance loss of profits is often critical for industrial projects where the building has been pre-leased or is purpose-built for a specific operation.
Hospital extensions, school buildings and university facilities often involve working on or adjacent to occupied buildings. The risk management requirements are heightened, and the insurance needs to address the potential impact on existing operations and occupants.
Roads, bridges, tunnels, water treatment plants and other civil engineering works require specialised contract works policies. These projects have unique risk characteristics including ground conditions, working over or near water, and interaction with existing infrastructure. Civil contract works insurance is a specialist area that requires broker expertise to ensure adequate cover.
One of the key differences between commercial and residential construction insurance is who arranges the contract works policy. On commercial projects, there are two common approaches:
The property owner or developer arranges a single contract works policy covering the entire project, including all contractors and subcontractors. This is common on larger projects and offers several advantages:
The head contractor arranges the contract works policy as part of their obligations under the building contract. This is more common on smaller commercial projects and fitouts. The contractor's policy needs to meet the minimum insurance requirements specified in the contract.
Broker tip: When reviewing a commercial building contract, always check the insurance clauses carefully. They specify who must arrange insurance, the minimum coverage required, the period of cover, and the interest of all parties that must be noted on the policy. Getting this wrong can create significant uninsured exposure.
Commercial construction projects often require cover extensions that are less common on residential work:
Most commercial building contracts specify detailed insurance requirements. Common Australian standard-form contracts and their insurance provisions include:
A specialist broker can review the insurance clauses in your building contract and ensure your policy meets all contractual requirements.
Beyond insurance, commercial construction risk management involves:
Commercial builders typically need contract works insurance, public and products liability, workers compensation, professional indemnity (if providing design services), and plant and equipment cover. The specific requirements depend on the contract and the nature of the commercial work.
It depends on the building contract. On larger projects, the principal (developer/owner) often arranges a single policy covering all parties. On smaller projects and fitouts, the contractor typically arranges insurance as specified in the contract.
Yes. Fitout projects are covered under contract works insurance. Ensure the existing building or tenancy is noted on the policy if there is risk of damage during the fitout works. This is particularly important for CBD high-rise fitouts where there is exposure to base building services.
Commercial premiums are individually rated based on project value, construction type, location and risk profile. Annual policies for commercial builders with $10M to $50M turnover typically range from $20,000 to $80,000. Major projects are assessed individually. See our cost guide for more details.
ALOP covers the principal's loss of anticipated rental income or profits if an insured event (fire, storm, etc.) delays project completion. It is particularly important for commercial projects where tenants are committed and the delayed handover causes measurable financial loss to the developer.