Two policies confuse tradies — contract works (which protects the job while you build it) and professional indemnity (which protects you when your advice or design is wrong). Here is what each covers, when you actually need them, and the claims-made trap that catches PI out.
Contract works — the job while you build it
Contract works (construction all-risks) protects the building works in progress and the things around them. It bundles two parts:
- Material damage — sudden physical loss or damage to the works at every phase (preparation, construction, testing, commissioning); materials on site (including owner-supplied and in transit); temporary works (formwork, falsework, scaffolding, sheds); and your plant and tools (on site, off site as an optional extension). It covers theft, malicious damage, fire, storm, flood, cyclone, earthquake, subsidence and landslip.
- Third-party liability — legal liability for third-party injury or property damage arising from the work. (This does not cover damage to the works themselves — that is the material-damage side.)
The big limit: resultant damage to correctly executed work is covered, but the cost of correcting the defective work itself is excluded. (More in What Your Insurance Does Not Cover.)
When you need contract works
It is not universally mandatory by law, but you will need it via:
- Licensing — owner-builders seeking a standard owner-builder licence are required to obtain contract works insurance (see Owner-Builder).
- Lenders — banks funding construction routinely require it as loan security before releasing progress payments.
- The contract — building contracts and head contractors routinely require the builder to arrange and maintain it. It is standard practice even where not strictly mandated. Project-by-project and annual policies are both available.
Professional indemnity — when your advice is the product
PI covers claims for financial loss caused by professional negligence — errors, omissions, wrong advice, a breach of professional duty in design or advisory work. It is the cover for when the thinking, not the building, goes wrong.
- Mandatory for building surveyors and certifiers, who must hold it for their accreditation period (confirm the current requirement with your state's certifier regulator).
- Seriously consider it if you take design-and-construct (D&C) contracts (you carry both design and build risk), have a contract that requires PI, run projects with significant design elements, or give building or design advice to clients. There is a specialised D&C PI for firms carrying both responsibilities.
The claims-made trap (PI is different)
Here is the catch that surprises tradies. Most construction policies (public liability, property, motor, contract works) are occurrence-based — they respond to incidents that happened during the policy period, even if the claim lands years later. PI is "claims-made" — it only responds to claims made and reported while the policy is active, regardless of when the work was done. The consequences:
- Continuous cover is essential — a gap means lost protection for past work.
- Tail exposure — if you stop the policy (retire, switch insurers), you are unprotected for past work unless you arrange run-off cover.
- Notify early — you must tell the insurer in writing of any circumstance that might give rise to a claim as soon as you are aware. Cover can be denied for late notification.
Common mistakes
- Assuming contract works fixes defects — it does not (resultant damage only).
- Letting PI lapse and losing cover for past D&C work.
- No run-off cover when winding down.
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