Understand how you can transfer risk with an insurance policy.
Owners and developers involved in construction projects must deal with the inherent risks involved with such projects. Their options are often are typically limited to avoiding, assuming, controlling, mitigation, or transferring risk. As you may or may not know, OCIP insurance can help transfer risk for those in the construction industry.
Contractual Risk Transfer
The simplest method of risk transfer, whereby the owner is indemnified by the General Contractor (GC) under contract and typically the contractor is required to provide Additional Insured (AI) status to the owner under the GC’s program. However, fundamental drawbacks are that the owner has no insurance limited of their own and must rely on the contractor’s coverage, which could be exhausted if the limits are not high enough, and the owner’s sole negligence is not covered, typically.
Project Specific Owner’s Interest General Liability
This is general liability coverage purchased in the name of the owner only, providing the owner with full general liability protection. Often, coverage is limited to the designated project with dedicated limits. The coverage is underwritten by the insurance carrier largely based on the type of project and venue. A major drawback to this coverage is that the owner has limited control over the cost of insurance that is loaded into the contractor’s bid and limited control over the quality of the contractor’s coverage.
Owner-Controlled Insurance Program
This is a comprehensive general liability project-specific program purchased by the owner and intended to cover both the owner and all contractors involved in the construction project. These programs provide full general liability coverage and are limited to the designated project with dedicated limits. There are many advantages to these programs, including obtaining comprehensive and adequate coverage, reducing the overall cost of coverage, and smooth claims handling.
OCIPs are complex programs that involve experienced insurance agents. It’s important to note that OCIPs are increasingly the most cost-effective method for insuring construction projects in the current environment, as well as giving peace of mind that the project is protected.
Protecting your business and contractors should be your priority. Make sure to get proper contractors insurance for quality protection and peace of mind. Contact Nahai Insurance Services to talk to our skilled experts today.