Kathmandu. Every year, construction companies spend a large amount of money in insurance premiums to avoid unforeseen events or accidents. However, due to lack of proper management and awareness, many companies are still facing huge financial losses due to accidents, project delays, equipment damage or liability claims.
According to experts, the problem is not the lack of insurance, but the quality of the insurance program, its structure and poor management. There are 7 major mistakes that construction companies make while insuring.
Most construction companies buy insurance policies based on prescriptions available in the market without a detailed review of the unique risks of the project. Structures such as high-rise commercial buildings, bridges or industrial machinery have different risks. In the absence of a project-focused risk assessment, significant risks are left out of insurance.
The cost of the project is constantly fluctuating due to market inflation, exchange rate fluctuations, and increase in the price of construction materials. If the declared price is less than the actual replacement cost, the company will receive only a portion of the claim in the event of the loss, and the remainder will bear the larger loss.
Every insurance policy has a clear condition for which damages are not claimed (exclusion). However, many contractors find that flooding, faulty work, design defects, theft or equipment breakdown are not covered only after the damage has occurred. It is essential to understand these exclusions before you begin work.
Evidence is the main basis for an insurance claim. Incomplete incident reports, missing photos, delayed notices, or inadequate project records can result in significant delays in receiving payments from insurance companies or reduced claim amounts.
Construction contracts often set out insurance requirements outside of statutory obligations. Failure to maintain the required covers, limitations, or approvals can result in fines and large uninsured liability.
As construction progresses, additional works, changes in contracts, use of new equipment, and the addition of subcontractors will occur. This increases the risk of the project. If the policy is not updated to meet these changes, the new risks will not be covered by insurance.
Successful companies don’t just see insurance as a legal document or a procurement process. They integrate it into project planning, safety management, contract administration, and proactive business continuity strategies.
Construction companies should regularly review their insurance programs. It should be consistent with the scope of the project, contractual obligations and changing market conditions.
