Construction Insurance
Comprehensive liability coverage for builders, contractors, and construction companies. From $180/month.
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What is Construction Insurance?
Construction insurance is specialized protection for businesses involved in building, renovation, and construction projects across New Zealand. It combines multiple types of coverage to protect against the unique risks faced by builders, contractors, and construction companies.
The construction industry is one of the highest-risk sectors in New Zealand. From site injuries and property damage to defective workmanship claims and contract disputes, construction businesses face daily exposure to potentially business-ending liabilities.
Key Point
Unlike general business insurance, construction insurance is specifically designed for the unique risks of building and construction work. It typically includes public liability, professional indemnity for design work, contract works coverage, and statutory liability protection.
Why Construction Insurance Is Different
Construction businesses need specialized insurance because:
Types of Construction Insurance Coverage
1. Public Liability Insurance
Protects against third-party injury and property damage claims arising from your construction activities. Essential for all construction businesses operating in NZ.
Typical coverage: $1M - $20M | Cost: $180-$450/month
Covers: Injury to clients or public, damage to adjacent properties, site accidents, falling debris
2. Professional Indemnity Insurance
Covers design errors, specification mistakes, and professional advice claims. Increasingly important as builders take on design responsibilities.
Typical coverage: $500K - $5M | Cost: $140-$380/month
Covers: Design defects, breach of professional duty, incorrect specifications, defective workmanship resulting from design
3. Contract Works Insurance
Protects the project itself during construction against damage from fire, theft, storm, vandalism, and other risks until practical completion.
Typical coverage: Sum insured based on project value | Cost: 0.3%-1.5% of contract value
Covers: Building materials, work in progress, temporary works, existing structures being renovated
4. Tools & Equipment Insurance
Covers theft, loss, and damage to tools, machinery, and equipment. Critical given the high value of modern construction equipment.
Typical coverage: $10K - $500K+ | Cost: $60-$250/month
Covers: Hand tools, power tools, machinery, scaffolding, specialized equipment
5. Statutory Liability Insurance
Protects against prosecution costs and defense fees for unintentional breaches of the Building Act, Health & Safety Act, RMA, and other legislation.
Typical coverage: $250K - $1M | Cost: $80-$180/month
Covers: Defense costs, prosecution fees, penalties (in some cases), legal representation
6. Plant & Machinery Insurance
Covers construction vehicles and heavy equipment including excavators, cranes, loaders, and transport vehicles.
Typical coverage: Agreed value | Cost: 2-5% of equipment value annually
Covers: Accidental damage, breakdown, theft, transit damage
Why New Zealand Construction Businesses Need Insurance
Building Act 2004 Liability
The Building Act imposes 10-year liability on builders for defects in residential building work. This extended liability period means claims can arise years after project completion.
Without insurance: A single weathertightness claim can cost $150,000-$500,000 to defend and remedy.
Health & Safety at Work Act
Construction businesses are PCBUs (Persons Conducting a Business or Undertaking) with significant health and safety obligations. Breaches can result in prosecution and substantial fines.
Without insurance: Legal defense costs alone can exceed $50,000, plus potential fines of up to $1.5M.
Client Contract Requirements
Most construction contracts (especially commercial and council projects) mandate minimum insurance levels. LBPs require public liability insurance to maintain their license.
Without insurance: You cannot bid on most commercial projects or maintain LBP status.
Financial Protection
Construction claims are expensive. Legal costs, remediation work, and compensation can easily exceed $200,000-$500,000 for a single incident.
Without insurance: A single serious claim could force business closure and personal bankruptcy.
Common Construction Claims in NZ
- • Weathertightness defects (average claim: $250,000-$450,000)
- • Damage to adjacent properties during construction ($50,000-$300,000)
- • Defective foundations or structural work ($100,000-$800,000)
- • Site injuries to third parties ($30,000-$200,000 in legal costs)
- • Non-compliant building work ($40,000-$150,000 remediation)
Construction Insurance Costs in New Zealand
Premiums vary based on your annual turnover, type of work, claims history, coverage limits, and specific construction activities.
| Business Type | Annual Turnover | Monthly Premium |
|---|---|---|
| Sole trader builder | $150,000 | $180 - $280 |
| Small building company | $500,000 | $320 - $480 |
| Medium construction company | $2,000,000 | $680 - $1,100 |
| Large commercial builder | $5,000,000 | $1,450 - $2,300 |
| Civil contractor | $3,000,000 | $950 - $1,650 |
Factors Affecting Construction Insurance Premiums
Type of Construction Work
High-rise construction, heritage buildings, and weathertightness-risk work attract higher premiums. Low-risk work like decks and fences costs less.
Claims History
Clean claims history can reduce premiums by 15-30%. Multiple claims, especially weathertightness or structural claims, significantly increase costs.
Coverage Limits
Higher liability limits increase premiums. Most SME builders need $2M-$5M public liability. Large commercial projects may require $10M-$20M.
Quality Systems
Site Safe certification, quality management systems, and formal safety procedures can reduce premiums by 10-20%.
Ways to Reduce Construction Insurance Costs
- • Maintain Site Safe or similar H&S certification (10-15% discount)
- • Implement formal quality management systems (5-10% discount)
- • Increase excess to reduce premiums (save 15-25%)
- • Bundle multiple policies with one insurer (10-20% multi-policy discount)
- • Exclude high-risk work types if not core to your business
- • Regular safety training and documented procedures
Top Construction Insurance Providers in New Zealand
Vero
Market leader in construction insurance with specialized underwriters who understand building risks. Excellent for medium to large construction companies.
Best for: Commercial builders, civil contractors, developers
NZI
Strong in residential building insurance with competitive rates for LBPs and small building companies. Fast claims processing and good broker network.
Best for: Residential builders, renovators, small contractors
QBE
International insurer with deep construction expertise. Excellent for larger projects and complex risks requiring high liability limits.
Best for: Large commercial projects, high-value work, complex risks
State Insurance
Good value for SME builders with straightforward construction insurance packages. Strong in residential building sector.
Best for: Sole traders, small building companies, trade contractors
Lumley
Competitive premiums for construction businesses with clean claims history. Flexible policy structures and good customer service.
Best for: Established builders with good safety records
FMG
Originally rural-focused but now covering all construction types. Excellent for rural and regional building businesses.
Best for: Rural builders, farm building contractors, regional construction
Real New Zealand Construction Claims
Auckland Residential Builder - Weathertightness Claim
Business: Small residential building company, 6 employees
Incident: Cladding defects discovered 4 years after project completion causing water ingress
Annual Turnover: $1.2M
Insurance: $2M public liability, $1M professional indemnity
Costs Covered by Insurance
- • Legal defense: $85,000
- • Expert reports and investigations: $32,000
- • Remediation work: $285,000
- • Alternative accommodation for homeowner: $18,000
- Total claim: $420,000
Outcome: Insurance covered all costs including remediation. Without insurance, the business would have faced bankruptcy. The builder maintained their LBP license and reputation.
Wellington Commercial Builder - Site Injury
Business: Commercial construction company, 25 employees
Incident: Pedestrian injured by falling scaffolding material, resulting in serious injuries
Annual Turnover: $3.5M
Insurance: $5M public liability, statutory liability cover
Costs Covered by Insurance
- • Injury compensation claim: $175,000
- • Legal defense costs: $68,000
- • WorkSafe prosecution defense: $42,000
- • Expert witness fees: $15,000
- • WorkSafe fine: $75,000 (covered by statutory liability)
- Total claim: $375,000
Outcome: Public liability and statutory liability insurance covered all costs. The business continued operating and improved its safety systems to prevent future incidents.
Christchurch Builder - Damage to Adjacent Property
Business: Renovation and extension specialist
Incident: Foundation work caused subsidence damage to neighboring property
Annual Turnover: $800,000
Insurance: $2M public liability
Costs Covered by Insurance
- • Structural repairs to neighbor's property: $142,000
- • Temporary accommodation costs: $24,000
- • Legal costs and negotiations: $38,000
- • Engineering reports: $12,000
- Total claim: $216,000
Outcome: The public liability policy paid for all repairs and associated costs. The builder maintained good relationships with the client and neighbor, and continues to operate successfully.
LBP Licensing & Insurance Requirements
Licensed Building Practitioners (LBPs) in New Zealand have mandatory insurance requirements to maintain their license.
LBP Insurance Requirements
- • Minimum Public Liability: $1 million (for practicing LBPs)
- • Professional Indemnity: Recommended but not mandatory for all license classes
- • Evidence Required: Current Certificate of Currency must be provided to the Building Practitioners Board
- • License Suspension: Failure to maintain insurance can result in license suspension
Insurance for Different License Classes
Design LBPs (Design 2, Design 3)
Should carry both public liability ($2M+) and professional indemnity ($1M-$2M). Design errors can result in costly claims years later.
Carpentry LBPs
Minimum $1M public liability required. Consider $2M-$5M for commercial work. Professional indemnity recommended if providing design advice.
Trade LBPs (Roofing, Cladding, etc.)
Public liability $1M-$2M essential given weathertightness risks. Strongly recommend professional indemnity for specialist cladding work.
Site LBPs
Public liability $2M-$10M depending on project size. Professional indemnity for supervisory and coordination responsibilities.
Construction Insurance FAQs
Do I need insurance to be a Licensed Building Practitioner?
Yes. All practicing LBPs must hold minimum $1M public liability insurance as a condition of their license. Failure to maintain insurance can result in license suspension.
What's the difference between public liability and professional indemnity for builders?
Public liability covers physical damage and injury to third parties during construction work. Professional indemnity covers defects and financial loss arising from your design work, advice, or professional services. Most builders need both.
Does contract works insurance cover defects in my work?
No. Contract works covers physical damage to the project during construction (fire, theft, storm). Defective workmanship claims are covered by professional indemnity or public liability insurance depending on the nature of the defect.
How long am I liable for defects under the Building Act?
The Building Act 2004 imposes 10-year liability for residential building work. This means claims can be made against you up to 10 years after completion. Ensure your professional indemnity policy provides retroactive cover.
What if I'm a subcontractor - do I still need insurance?
Yes. Most head contractors require subcontractors to hold their own public liability insurance ($1M-$5M depending on trade). You cannot rely on the head contractor's insurance to cover your liabilities.
Does my insurance cover work done by subcontractors?
Your public liability typically covers your vicarious liability for subcontractors' work, but subcontractors should maintain their own insurance. Always verify subcontractors have adequate insurance before engaging them.
Can I get insurance if I've had previous claims?
Yes, but premiums will be higher and insurers may impose exclusions or higher excesses. Some insurers specialize in higher-risk builders. Working with an insurance broker can help find appropriate coverage.
What's an appropriate excess for construction insurance?
Standard excess is $2,500-$10,000 for public liability and professional indemnity. Higher excess ($15,000-$25,000) can reduce premiums by 20-30% but ensure you can afford the excess if a claim arises.
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