Knowledge Center

Every construction project carries visible risks. Weather delays. Labor shortages. Material price swings. Equipment breakdowns.

Most contractors plan for those risks. 

The less obvious risks often are inside the contract and the insurance policy(ies) for the construction project. When project values change or responsibilities are not clearly defined, a relatively straightforward issue can become a much larger financial problem. 

Here are two areas worth a closer look to help make sure tomorrow's projects are built on a stable foundation. 

How Construction Contracts Decide Who Pays When Conditions Change

Contracts do more than outline the scope of work. Contract terms and conditions determine how risk is shared when conditions change. 

Contract language often receives less attention than budgets, schedules, and staffing during the early stages of a project. Yet when unexpected issues arise, whether it's a weather delay, a supply disruption, or a disagreement over damaged work, contract language often determines who is responsible and how the financial impact is shared. 

A few provisions can make a meaningful difference:

• Escalation clauses for material price increases
• Force majeure language addressing unexpected events
• Indemnification provisions and risk transfer obligations
• Responsibility for delays and schedule impacts

These details can become some of the most important language in the agreement once work is underway. The best time to resolve uncertainty is before the contract is signed, not after the project is delayed. 

Contracts and builders' risk values have one thing in common: both are based on assumptions that can change once the job is underway. Taking a fresh look at the contracts and builders' risk values during the course of a project can help reduce surprises later. 

Would Your Builders' Risk Values Hold Up Today?

Construction projects rarely look the same at completion as they did on day one. 

Labor increases, higher material prices, and project delays can all affect the costs of repairing or rebuilding after a covered loss. 

Imagine a project that began with one set of assumptions around labor rates and material pricing. Several months later, change orders have been approved, subcontractor expenses have increased, and weather-related delays have pushed the schedule back. If a covered loss occurs at that point, the cost to rebuild may look very different than it did when the Builders' Risk policy was first placed. 

Builders' Risk values established at the beginning of a project may not always keep pace with changing project conditions. In some cases, that can create coverage gaps or coinsurance concerns if insured values no longer reflect current replacement costs. 

A periodic review of insured values can help answer a simple but important question:

If a loss happened today, would your insurance respond to today's replacement cost or last year's estimate?

A Five-Minute Mid-Project Checkup

Construction projects rarely look exactly as they did on day one. Project values change, schedules shift, and new challenges can emerge, including weather-related delays and disruptions. Insurance and risk management strategies should keep pace. 

A quick review during the life of a project can help confirm that assumptions made at the beginning of the job still reflect current conditions. 

Consider asking: 

• Have project values changed since coverage was placed?
• Do Builders' Risk limits still reflect today's replacement costs?
• Have change orders or delays altered the project's financial profile?
• Does the contract clearly address weather delays and material price increases?
• Are all parties aligned on how risk is allocated if conditions change?

A mid-project review does not need to be complicated, but it can help keep contracts, coverage, and current project conditions aligned.