Wrap Insurance Explained


What Is Wrap-Up Liability Insurance?

Wrap-up liability insurance is a type of insurance designed to manage liability risks during ongoing construction projects. If you are about to embark on a major construction, addition or renovation project, wrap-up liability insurance in Canada might be important. Keep reading to learn more about wrap-up insurance, including who it covers, how much it costs, what it covers, and how ALIGNED can help you find wrap-up insurance policies.

A large building under construction.
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What is wrap-up liability insurance, and how does it work?

Wrap-up liability insurance is a type of insurance that is designed to protect the parties involved with a construction project from liability for bodily injury or property damage to third parties during construction. As those in the industry know, behind any major construction or renovation project is a large group of companies and professionals working together to bring the project to life.

These professionals can range from engineers, general contractors and subcontractors to architects, plumbers, electricians, and much more. Wrap-up liability insurance brings these different professionals and companies under one single policy for a certain project, rather than all the contractors having to purchase their own independent coverage. Therefore, wrap-up liability insurance simplifies the process of insuring a project. With this type of coverage, there is usually one common claim limit for the entire project, meaning the general contractor will not have to worry about whether the subcontractors purchased adequate insurance.

Wrap-up insurance also allows the policyholder to set a coverage limit based specifically on the size of the project. This is a major benefit as the coverage needs between projects vary significantly. Whether one building might require coverage of $50 million or more, another might only need coverage worth $5 million. Further, with this type of insurance, if an incident occurs on-site, you do not need to waste time trying to determine which specific party was liable. Instead, since you have one single wrap-up insurance policy, settling a claim will be far easier.

Lastly, one single wrap-up liability insurance policy for your project eliminates the hassle of having to review and manage multiple insurance policies. Imagine if the dozens or even hundreds of professionals working on your project each had their own policies with their own terms, conditions, and renewal dates. You could spend an endless amount of time reviewing these policies. But with one wrap-up liability insurance policy that covers the whole project, you only have to keep track of one policy’s terms, conditions, and expiration date.

Who can buy wrap-up liability insurance?

Construction Wrap Up Insurance: As mentioned above, wrap-up liability insurance is designed to cover a wide range of professionals as they work on a certain construction project. However, there are two ways that wrap up insurance can be structured: as owner-controller insurance or as contractor-controlled insurance. It is important to understand the difference between the two, which is why we define owner and contractor-controlled wrap-up liability insurance below:

  • Owner-controlled wrap-up liability insurance: As the name suggests, an owner-controlled policy is when the owner of the property under construction takes out the policy. Owner-controlled wrap-up liability policies typically include the following coverage types: commercial general liability insurance, builder’s risk insurance, professional liability insurance, and umbrella insurance. Of course, additional insurance can be added, such as pollution liability insurance. However, other types of insurance, such as commercial auto insurance, are not usually featured in owner-controlled policies.
  • Contractor-controlled wrap-up liability insurance: Contractor-controlled wrap-up insurance is when the general contractor tasked with constructing the property takes out the policy. In the case of a contractor-controlled policy, the contractor is responsible for ensuring that the coverage purchased is sufficient to cover the size of the project. Contractor-controlled wrap-up liability insurance policies usually include the same types of coverage as owner-controlled policies. However, this type of policy may be preferred as it often costs less than an owner-controlled policy while simultaneously offering higher coverage limits. It is important to note that while contractor-controlled insurance policies typically cover all subcontractors, they do not usually cover suppliers that deliver materials to the construction site or companies that provide security services during construction (these professionals must purchase their own commercial general liability policies).

There is one alternative to an owner or contractor-controlled wrap up liability policy, and that is a joint owner-contractor policy. It is possible for the property owner and the general contractor to join forces and purchase a wrap-up liability policy together. This is what is known as a partner-controlled policy. The key difference here is that the sponsors of the partner-controlled wrap up policy share the protection and benefits of coverage.

How much does wrap-up liability insurance cost?

The cost of wrap-up liability insurance varies since projects range in value. While some projects may cost as little as $1 or $2 million, others might be worth upwards of $100 million. As you might suspect, projects of such vastly different worths will have different coverage needs. Beyond the project value of the project, policyholders might wish to include specific clauses or endorsements in their policies. For example, if the policyholder is more risk averse, they may wish to purchase additional coverage like pollution liability insurance, which will further increase the cost of insurance. To learn more about the cost of wrap-up liability insurance, contact ALIGNED today.

Is wrap-up liability insurance the same as builder’s risk insurance?

Wrap-up liability insurance and builder’s risk insurance might be used interchangeably, but in reality, they are not the same. Here is the difference: Where wrap-up liability insurance is a type of commercial liability insurance that protects all professionals working on a construction project, builder’s risk insurance is a form of property insurance that is designed to cover property damage for a property under construction (if often covers both the physical structure being constructed and the equipment and materials on-site).

Therefore, the main difference between the two is that wrap-up insurance is intended to safeguard policyholders against liability claims related to construction projects while builder’s risk insurance is intended to protect policyholders from property damage caused by insured perils. That said, one of the reasons they may be spoken of together (beyond the fact that they both provide protection for construction projects) is that builder’s risk coverage may be included in wrap-up liability policies. In other words, it might be a type of coverage that policyholders choose to add to their wrap-up liability policies. We delve into what exactly wrap-up liability insurance covers next.

What your wrap-up liability policy may cover

Wrap-up liability policies vary and can be customized to your specific construction project. That said, wrap-up liability insurance commonly includes the following coverages:

  • Commercial general liability insurance: Commercial general liability insurance, or slip and fall insurance, can protect your project from claims of third party bodily injury and property damage. Specifically, if a claim is brought against you, your insurance provider may cover the cost of the lawsuit (e.g. defence and settlement fees, etc.), as well as any necessary medical expenses, repairs, and more.
  • Builder’s risk/Course of construction insurance: Builder’s risk insurance, also known as course of construction insurance, covers the property being constructed and any business-related materials on-site (e.g. building materials). Specifically, it protects the building and its materials from property damage caused by covered losses such as water, theft, vandalism, falling objects, windstorms, fire, etc. Course of construction insurance typically applies for the entire duration of the project and may be available to a wide range of projects, including new constructions, as well as major renovation projects. 
  • Professional liability insurance: Professional liability insurance, also referred to as errors and omissions insurance, can protect your team of construction professionals from claims of negligence, error, failure to deliver a service as promised, etc. 
  • Pollution liability insurance: Pollution liability coverage is important if you wish to safeguard your construction team against claims of third party bodily injury, property damage, or environmental damage resulting from your work. 
  • Umbrella liability insurance: Umbrella liability insurance takes effect when regular liability limits are reached, meaning it can protect your construction project against unexpected or catastrophic circumstances.
  • Commercial auto insurance: Commercial auto insurance is not a standard component of most wrap-up liability insurance policies, but it may be added. It is important if your construction team uses vehicles for business purposes, such as to transport equipment or materials to and from the construction site. Depending on where you live, your commercial auto insurance coverage may include third party liability coverage, comprehensive coverage, uninsured automobile coverage, accident benefits coverage, collision coverage, and more. 

How can I buy wrap-up liability insurance?

Buying wrap-up liability insurance has never been easier thanks to reputable insurance brokerages like ALIGNED. With us, you will find the right insurance for your construction project in no time. Give us a call, and one of our licensed insurance brokers will dedicate themselves to finding a great policy at an affordable rate for your construction project. We will take the time to understand your project’s needs and recommend appropriate coverage. Learn more about how you can save time and money by enlisting the help of an ALIGNED insurance broker today.

Key considerations before purchasing a wrap-up liability insurance policy

  • The cost: The first consideration when purchasing wrap-up liability insurance is the cost. As a customer, you likely want to know how much a wrap-up policy will cost for your upcoming construction project. Contact ALIGNED to request a quote today. We are happy to provide our customers with accurate, competitive quotes on many types of commercial insurance.
  • Coverage options: Before buying a wrap-up liability insurance policy, you will need to decide which coverage types and limits to purchase. There are many options out there, ranging from pollution liability insurance and tools and equipment insurance to commercial general liability insurance and builder’s risk insurance. For expert advice on the coverage types and limits that are right for your project, contact ALIGNED.
  • Choosing between an insurance broker and an insurance company: One last consideration is whether you want to buy wrap-up liability insurance from an insurance broker or an insurance agent. Both are viable options, though many policyholders find working with a broker to be a convenient, hassle-free option. 

Purchase wrap-up liability insurance with help from an ALIGNED insurance broker

Ready to buy wrap-up liability insurance for your upcoming construction project? Contact ALIGNED today! One of our knowledgeable brokers will be pleased to assist you. They can shop around on your behalf, explain your coverage options, and answer any questions you may have about wrap-up liability insurance. Call ALIGNED to speak directly with a broker and get started now or click here for a free quote.

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