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Construction Insurance: Traditional vs. Wrap-Up Programs
When planning a construction project, a robust insurance strategy is vital for managing risk. Do you rely on individual contractor policies, a comprehensive wrap-up program or some other approach? Understanding your options is the first step for safeguarding your construction investment.
Keep in mind that with any approach, your builder's risk insurance is a separate, stand-alone policy that covers physical damage to the in-progress structure and building materials/equipment stored onsite.
The options below address the liability exposures for those working on the project. The specialists at Brown & Brown can work with you to look at the pros and cons of these approaches for your specific project.
Defining Construction Insurance Approaches
You can structure your insurance in a few ways. Each method offers different levels of control, cost-effectiveness, and administrative responsibility.
- Traditional insurance policies: Each party involved in the construction project, including the general contractor and all subcontractors, buys their own insurance independently. This is a decentralized approach where you set minimum requirements, but each contractor manages their own coverage.
- Owner/general contractor project-specific: This approach offers site and completed operations coverage for the owner/developer and general contractor. It is most common for residential construction and in tougher jurisdictions like New York. This method is also popular when there is common ownership between the owner and the general contractor or construction manager.
- Owner’s interest: This type of insurance protects the owner/developer in addition to or instead of the traditional insurance provided by project contractors. It addresses owner’s negligence, defense costs for project-related issues, and claims near but outside the worksite.
- Contractor-controlled insurance program (CCIP): In this model, the general contractor purchases a comprehensive insurance package that covers the project owner, the general contractor, and all enrolled subcontractors. A CCIP consolidates coverage for general liability, excess liability, and often workers' compensation under one program. This centralizes insurance management under the general contractor.
- Owner-controlled insurance program (OCIP): With an OCIP, the project owner provides a comprehensive insurance policy for most or all parties working on the construction site. Similar to a CCIP, this wrap-up program typically includes workers' compensation and other project-specific coverages, but an OCIP gives the owner direct control over the insurance strategy.
Choosing Between Traditional Insurance, CCIP and OCIP
When selecting an insurance approach, consider your project's size, complexity, and your desired level of control. Thinking through these factors early in the planning process allows you to build insurance requirements directly into your contracts.
Traditional Construction Insurance
For smaller projects with just a few contractors, a traditional approach can be the most straightforward and cost-effective solution. The owner faces no direct administrative work, as each party is responsible for its own insurance. However, this method can create uneven coverage across the project. Verifying that every subcontractor maintains adequate and continuous coverage can be challenging, potentially leaving you exposed if a policy lapses.
Contractor-Controlled Insurance Program (CCIP)
A CCIP is often used for larger construction projects where the general contractor has significant experience managing insurance programs. This approach creates cost certainty for the owner and places insurance decisions in the hands of the party most familiar with the construction process. While this streamlines administration for the owner, it also means you have less direct input into coverage decisions and must rely on the contractor to protect your financial interests.
Owner-Controlled Insurance Program
An OCIP is for large, complex construction projects with numerous subcontractors and specific risk management needs. This wrap-up program lets you, the project owner, shape the coverage, set the terms and manage the overall insurance strategy. An OCIP helps enforce uniform safety procedures, enables broader coverage with higher dedicated limits and reduces the potential for lawsuits between project partners. While it requires more administrative involvement from the owner, it provides the greatest level of control and alignment.
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Traditional Construction Insurance
For smaller projects with just a few contractors, a traditional approach can be the most straightforward and cost-effective solution. The owner faces no direct administrative work, as each party is responsible for its own insurance. However, this method can create uneven coverage across the project. Verifying that every subcontractor maintains adequate and continuous coverage can be challenging, potentially leaving you exposed if a policy lapses.
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Contractor-Controlled Insurance Program (CCIP)
A CCIP is often used for larger construction projects where the general contractor has significant experience managing insurance programs. This approach creates cost certainty for the owner and places insurance decisions in the hands of the party most familiar with the construction process. While this streamlines administration for the owner, it also means you have less direct input into coverage decisions and must rely on the contractor to protect your financial interests.
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Owner-Controlled Insurance Program
An OCIP is for large, complex construction projects with numerous subcontractors and specific risk management needs. This wrap-up program lets you, the project owner, shape the coverage, set the terms and manage the overall insurance strategy. An OCIP helps enforce uniform safety procedures, enables broader coverage with higher dedicated limits and reduces the potential for lawsuits between project partners. While it requires more administrative involvement from the owner, it provides the greatest level of control and alignment.
Construction Insurance and Wrap-Up Program FAQs
Wrap-up programs like an OCIP or CCIP are typically best for large-scale projects, such as commercial buildings, infrastructure developments or extensive residential complexes. The significant project cost and number of subcontractors on these jobs make centralized insurance more efficient and cost-effective.
A wrap-up program usually bundles key liability coverages into one package. This commonly includes general liability, excess or umbrella liability and workers' compensation for all enrolled participants on the jobsite.
When a subcontractor enrolls in a wrap-up program, their own liability policies do not apply to the work performed on that specific project. Instead, the wrap-up program's coverage takes precedence, and the cost of the subcontractor’s insurance for that job is typically deducted from their bid.
A deductible is the amount paid out-of-pocket before insurance coverage kicks in. In a wrap-up program, the responsibility for paying the deductible is defined in the program documents and can vary. It often falls to the program sponsor (the owner in an OCIP or contractor in a CCIP) or the specific contractor involved in the claim.
Wrap-up programs promote a unified approach to safety by establishing consistent risk management and loss control standards for every contractor on site. A central administrator oversees safety protocols, leading to fewer incidents and better claims outcomes.
Coverage for incidents that occur after construction is finished is a key feature of wrap-up programs. This 'completed operations' coverage typically extends for a set number of years, matching the local statute of repose to protect against liability claims that may arise long after the project is done.
While not generally required by a specific law, many public entities and private lenders mandate the use of a wrap-up program for large-scale projects. This requirement ensures the project has adequate, uniform, and continuous coverage.
In most mandatory wrap-up programs, subcontractors cannot opt out if they wish to work on the project. Failure to enroll can result in the subcontractor being unable to begin work, creating unplanned liability for the project sponsor and potential project delays.
Data is vital for monitoring program performance, identifying safety trends, and managing claims effectively. By analyzing data on incidents and losses, program administrators can implement targeted safety initiatives to reduce risks and control the overall cost of the insurance program. Brown & Brown can help you with in-depth analytics.
Additional Resources
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Our 2026 report unites Brown & Brown and Risk Strategies resources, knowledge and proven experience to deliver stronger insurance solutions for commercial insurance, employee benefits and personal insurance.
Workers’ Comp Insurance: 8 Ways to Trim Costs
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Connect with Brown & Brown
Brown & Brown can help you design a construction insurance strategy that aligns with your goals. Whether you need guidance on traditional insurance, OCIPs or CCIPs, our specialists offer tailored solutions to help manage risk and control costs from project start to completion. Connect with us today to discuss your coverage options.