A contractor controlled insurance program (CCIP) is a specific insurance policy purchased by general contractors to coordinate general liability for construction projects. Also called wrap-up insurance, CCIP insurance is controlled by contractors rather than project development owners. The cost for a CCIP starts at 1% of the construction costs with policy durations extending past construction completion.
Finding the best provider for CCIP policies requires selecting one with the appropriate coverage for the specific project risks.
CCIP Providers
| Provider | Best For |
|---|---|
| Alliant | Projects needing a streamlined process for quoting and binding a policy. |
| Chubb | Smaller projects looking for risk management resources. |
| Travelers | CCIP policies tailored to a wide range of projects. |
| USI | Businesses looking to combine risk analytics with an in-person consultation. |
Alliant
Alliant is a national leader in major industry insurance programs including agriculture, aviation, and petroleum companies. It offers individually underwritten programs as well as cobrokered policies to diversify risk and protect major projects effectively. Alliant also has a Risk Control Consulting division helping to customize policies and mitigate lesser-known risks.
Alliant is a good choice for its streamlined underwriting system, 123OCP. This is the only online quote and bind system for large contractor’s projects. This program must be written on Admitted “A” Rated Paper meeting the highest credit standards.
Chubb
Chubb is the largest publicly traded property and casualty insurer in the world providing and leading the United States in commercial lines insurance. Chubb products are sold through brokers and independent agents, bringing a local touch and internationally recognized practices for risk expertise and underwriting discipline.
Chubb is the right choice for a general contractor with a smaller construction project. Chubb’s CCIP insurance policies are available for projects starting at $10 million. Its lower construction cost threshold for purchasing a policy combined with its industry experience and risk management services makes Chubb a carrier to consider for smaller projects.
Travelers
Travelers is rated consistently in the top two as a commercial insurance company by premiums. When it comes to CCIP insurance, Traveler’s has more than 30 years of experience in offering coverage to contractors. It also has more than 100 risk control consultants who will offer on-site consultations.
Travelers offer a wide variety of CCIP insurance policies, such as bridge construction, and bring an in-house claims team to the experience. Traveler’s is the right choice for a general contractor looking for a carrier that will work closely with them throughout the project.
USI
USI is an international brokerage using proprietary analytics to define risks while bringing local service of more than 8,000 nationwide experts to bring innovation to major projects. USI offers insurance, financial services, and employee benefits for business owners, making it an easy choice to get everything covered under one roof.
USI is the right choice for contractors who value the combination of data analytics and in-person advice. By using local resources at the project location, USI underwriters are best able to tailor risk mitigation solutions that ultimately reduce the overall cost of insurance and risk management.
Contractor Controlled Insurance Program Costs
CCIP insurance costs often range from 1% to 2% of the overall construction project budget. Costs will vary depending on the size of the project, additional coverages added to the extended tail period duration, and the number of subcontractors on the project.
Premium credits can help offset the cost for the general contractor. Premium credits are credits the contractor gets for maintaining the master insurance policy. The general contractor determines the cost, deductible, and any penalties for insurance and who is responsible for them. The goal of maintaining the CCIP master policy is to reduce the overhead costs to subcontractors, thus reducing the price bid on the project. These credits may in turn help reduce the premium.
CCIP costs are affected by:
- Budget: Premiums are directly tied to the overall construction cost of the project.
- Deductible: Higher deductibles mean the project has higher self-insured retention reducing the potential payout of a claim.
- Duration of coverage: The period of indemnity is a tail coverage that protects contractors and owners after the project is completed; the longer the period of indemnity, the costlier the coverage.
- Loss history: Companies and contractors with a history of claims will pay more for coverage and protection.
Who CCIP Insurance Is Right For
Historically, a CCIP policy is for major developments exceeding $50 million in construction budgets. While this program is now available for a wider variety of construction projects, it isn’t always a cost-effective solution. An owner concerned with extended project liability should have a CCIP in place to protect his interests in keeping the project on schedule and budget.
According to risk management experts, IRMI, common questions to consider when purchasing a CCIP:
- Are there excluded vendors or contractors?
- What are the exact locations covered?
- Is the subcontractor’s existing insurance agreeing to not subrogate?
- What time periods are included and excluded?
- What’s the relationship between general contractors’ and subcontractors’ regular insurance?
- Are there premium deductions and, if so, how are they calculated?
It’s important to address these questions at the policy inception with existing subcontractors already having contingent contract awards in place.
The Purpose of CCIP and How It Works
The purpose of CCIP insurance is to provide one total package of liability protection for all contractors working on the project. CCIP will usually include excess liability and workers’ compensation. This is why it’s commonly referred to as wrap-up insurance because the coverage wraps around all of the involved parties. A general contractor purchases one policy. This brings the company, and all subcontractors under one general liability policy for the specified work. This protection for all involved parties, from the top down, helps streamline any liability disputes that may arise during the construction job.
For example, a strip mall is being built by NewMalls USA, which owns and finances the project. All Jobs General Contractor is hired to do the physical construction by hiring and overseeing various subcontractors. The subcontracted plumber’s work leads to a pipe bursting that floods not just the project, but the neighboring art studio. The CCIP insurance policy would cover the damages caused by the subcontractor.
Having a CCIP also brings down the cost of the overall project. Because the CCIP provides coverage for all subcontractors, the insurance is typically less than if each subcontractor had to purchase their own policy. This, in turn, helps lower the overall cost of the project which then helps the general contractor be competitive.
Pros & Cons of a CCIP
| PROS | CONS |
|---|---|
| Reduce number of insurers: One insurance company reduces insurance gaps and extensive litigation or subrogation to determine a responsible subcontractor. | Extended subcontractor negotiation process: General contractors must add the process of pricing the insurance after the initial bid is proposed by subcontractors. |
| Cost reduction: By maintaining one insurance policy, subcontractors don’t need to get their own, which saves on overhead that trickles up the project budget. | Difficult change order process: Insurance is priced on the final bids of contractors, thus a change order changes the pricing of the CCIP insurance. |
| Control of insurance: Project management maintains control of insurance with the best vantage of projecting all levels of risk. | Cost of administration: General contractors must incorporate the cost of a subcontractor and CCIP cost administration to the project’s overhead. |
| Adequate limits: Assures project owners that the project is insured properly from top to bottom with every subcontractor projected. | Potential of insufficient coverage: Projects that go over budget are at risk for not having the correct amount of liability insurance for major claims. |
| Larger contractor pool: By not requiring subcontractors to have their own insurance, project leaders can open bidding from a bigger pool of subcontractors. | Deduction may not offset premium: Premium credits provided by subcontractors may not truly add up to savings on the overall project budget. |
| Coordinated claims: One policy reduces the number of potential policies that need claims management. | |
| Minimized subrogation: Consolidating policy coverage means there’s no need for the general contractor’s insurance to subrogate to a subcontractor’s policy. | |
Coverage & What CCIP Doesn’t Cover
CCIP insurance protects against general liability at the job site. However, it doesn’t offer builders risk protection regarding business assets, supplies, and materials used in the construction project; nor does it extend to business office liabilities or compensation. Note that not every subcontractor is covered under CCIP.
Certain subcontractors and providers aren’t covered by the CCIP insurance:
- Suppliers
- Material vendors
- Haulers
- Truckers
- Hazardous operations (blasting and demolition)
Subcontractors must be specifically identified with a budget itemized for their duties on the overall project. General contractors need to obtain a Certificate of Insurance from excluded subcontractors for the work being performed on behalf of the project.
What To Keep In Mind When Purchasing CCIP
Major construction developments have many moving parts and a lot of stakeholders providing input. Getting CCIP insurance is imperative to the financial success of the project. As such, it’s important that small business owners take the time to prepare.
1. Solidify Subcontractors’ Contingent Contracts
Changing the coverage terms and inclusions on a CCIP isn’t as simple as calling your agent and asking for a change in deductible or extra inclusion. Inform subcontractors that bids must be firm and obtain contingent contracts upon the project greenlight. The insurance is one of the last components set in place before you break ground.
2. Confirm the Period of Indemnity for CCIP Policies
The period of indemnity protects all stakeholders and contractors for a timeframe past the project completion. Confirm how long the CCIP protects for liabilities beyond the project’s construction completion date. The period of indemnity should coincide with the state statute of repose (similar to a statute of limitations) for claims to be filed.
3. Review All Insurance Coverage Needs
Major construction developments need more than just general liability coverage. Look at the overall need to determine if builder’s risk, workers’ compensation, and umbrella insurance policies should also be considered.
Frequently Asked Questions (FAQs)
What is the difference between CCIP and OCIP?
The primary difference between CCIP and OCIP is who is purchasing the policy. CCIP is purchased by the contractor and an OCIP is bought by the owner of the project.
How much does CCIP insurance cost?
CCIP insurance costs vary depending on the project. The cost usually starts at 1% of the total cost of the project. So if you are constructing a $1 million dollar building, CCIP insurance would cost $10,000.
What’s the difference between CCIP and Builders Risk?
A CCIP is focused on the liability of the project. Builder’s risk has broader coverage for the building, materials and equipment involved in the construction process.
Bottom Line
Because CCIP programs are very complex, understanding what is CCIP requires an insurance partner that a general contractor can trust to truly evaluate the project risk, overall company risk, and ways to save. Every development needs insurance to get permits and fulfill contract terms with developers. CCIP covers more than builder’s risk insurance, so be sure to see the pros and cons of both for your next real estate development project.
