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Are you a contractor working on a large construction project? Or do you have a bunch of smaller projects you’re managing all together?
If so, you’re going to need wrap-up insurance. This type of business insurance policy protects both contractors and subcontractors on projects that are worth more than $10,000,000.
But you’re going to have to decide between one of two types of wrap-up coverage:
- Owner controlled insurance program (OCIP)
- Contractor controlled insurance program (CCIP)
Ready to own and control your business’ defenses? To help you decide whether OCIP insurance or CCIP insurance is the most appropriate for your situation, we’ll review the policies’ similarities and differences. Let’s do this.
OCIP vs. CCIP
At first glance, OCIP insurance and CCIP insurance seem similar. The primary difference stems from who is sponsoring the policy:
- OCIP – The owner(s) of the construction project sponsors the wrap-up policy.
- CCIP – The primary general contractor hired to work on the project sponsors the wrap-up policy.
The project sponsor is responsible for securing construction insurance coverage, paying for the insurance program, and hiring someone to administer it.
Now, there are reasons why one type may be preferable to the other. Later, we’ll go into further details about the pros and cons of each type of insurance. But first, let’s delve into what’s covered in a typical wrap-up policy.
Wrap-up insurance can help cover a number of risks expected on a large construction project, including the construction itself and the workers. They “wrap” multiple individuals and policies into a bundled insurance plan. In many cases, they combine several traditional insurance policies into one consolidated insurance program, which is tailored to meet the risk profile of a given construction project.
Typically, policies will vary. Ultimately, you decide what forms of coverage are included. With that being said, most policies typically include some combination of the below:
- Commercial general liability insurance – This protects against the costs of many of the liabilities of interacting with third parties.
Did a contractor sustain an injury after tripping over your work tools? General liability can help cover third-party bodily injury that occurs on the site, or injuries from work-related activities performed by the project owner, contractor or sub. Break an expensive item? It will help cover third-party property damage. Offend a professional rival? It protects you from advertising injury claims.
Typically, most contractors who obtain a CCIP will already have their own general liability policy. If that’s the case, the policies may simply overlap one another. It’s better than having gaps in coverage.
- Workers’ compensation – This type of insurance is required in every state besides Texas. However, the laws surrounding workers’ comp vary from state to state. Workers’ compensation insurance protects a business from the financial consequences of a worker getting sick or injured on the job. It can help cover the employees’ medical bills, rehabilitation, lost wages, and death and disability benefits.
- Operational coverage – This provides industry-specific or region-specific coverages, protecting you from certain circumstances like earthquakes, floods or tornados.
- Builders risk – This functions similarly to a property insurance policy, except it covers buildings that are currently under construction as well as on-site equipment from risks like weather, water, fire, smoke, and vandalism.
- Completed operations coverage – This coverage can provide protection past the statute of limitations (the maximum time after an event when legal proceedings can occur). It ensures that all parties are protected for an extended period of time following the actual completion date of the project.
Put simply, whether you’re an owner or an individual contractor, wrap-up insurance empowers you to have greater control over a project. Since everyone in the policy is basically considered a Named Insured you can work confidently knowing that all your subcontractors have the liability coverage they need.
Additionally, you don’t have to worry about limitations or exclusions in individual policies that other people bought. It’s much easier to confirm that everyone’s following the policy terms, track claims, or request a Certificate of Insurance (COI).
There are several potential advantages for owners controlling the insurance program. They include:
- Lower costs – Typically, you spend less on the overall OCIP policy than you would when having to buy each policy individually or paying for each of your contractors’ policies. Also, thanks to workers’ compensation putting safety measures in place with the OCIP, you reduce the likelihood of losses occurring.
- Time savings – A OCIP streamlines much of the hassle involved with administration. It’s easier to track claims or get COIs.
- Improved protection – A OCIP provides broad coverage with a higher dedicated policy limit for all parties. When your contractors and subcontractors have higher limits, your insurance protection improves.
One disadvantage of OCIP insurance is the administrative hassle of having to manage all of the coverage, including the costs of hiring an administrator. Additionally, you must be wary of false claims—contractors or subcontractors could take advantage of the broad coverage by claiming an injury that happened off the job.
For CCIP, the general contractor has the power to decide a number of elements related to the policy, including:
- The insurance broker
- The administrator
- The carrier
- Policy terms
- Legal counsel (in the event of a claim)
The contractors’ sponsorship of the wrap-up policy allows them to tailor contracts according to the terms of the previously negotiated wrap-up policy. And since they’re responsible for project supervision and oversight, they’re ideally positioned to sponsor it.
The benefits of CCIP are insurance cost savings and lower premiums. On the other hand, there are drawbacks: the administrative costs, including time, resources, and having to hire an insurance administrator. Also, some owners who have OCIPs may force their contractor to decide between working on the project with an OCIP or not at all.
One insurance decision that’s a no-brainer? Getting general liability insurance.
General liability insurance with Thimble
If you’re a contractor, how can you get general liability insurance for a smaller job?
Thimble’s Contractor Insurance is the perfect addition to your toolbox.
With Thimble, you can get an on-demand general liability policy that comes with game-changing flexibility. Affordable policies are available by the hour, day, or month.
Getting the liability coverage you need takes less than 60 seconds. Just download the Thimble mobile app or click “Get a Quote.” Input some quick info about your business, and we’ll generate an instant quote. Click to purchase and we’ll immediately send as many COIs as you need to your email inbox.
Wrapping up the wrap-up policy
For contractors working on a project that’s worth more than $10,000,000, it’s wise to protect yourself with a wrap-up policy. For that, the policy can be controlled either by you (the contractor) with a CCIP or by the project owner with an OCIP.
Your decision depends on your unique situation. And in some cases, you’ll need to just go with the OCIP if you want the job.
When you do have the freedom to choose, be sure to take your time and do your research before you select one or the other. At the end of the day, you want to choose a program that works for you.