Understanding run-off & annual turnover policies

When you take out an Annual Projects policy, it can be set up on a run-off or annual turnover basis. Usually depending on the type of projects you take on, and how many you take on, you can choose which type of policy suits you best. 

Fast Facts

MECON’s run-off insurance covers projects commencing during the policy period from  start to finish, whereas turnover insurance covers all projects currently underway and  any new work commencing during the period of insurance until the policy expires.

PROTECTION FOR YOU AND YOUR BUSINESS

The difference between these types of policy depends upon your preference for how long they’ll be covered for and the premium basis. Here are the details.

RUN-OFF BASIS

Also known as Projects or Contracts commencing policies.

With MECON insurance, projects that commenced during the policy period, insured  on a run-off basis, are automatically covered from start to finish – including their  defects liability period. This is not always the case with other products on the market – with some policies not automatically continuing cover for the remainder of the  project if you choose not to renew them.

The cost of the premium is based on the total completed value of each project that you expect to start during the year, which is later adjusted to reflect how many you actually commenced and their actual values.

The scope of the cover and the cost for insurance doesn’t change during the project. That means, it can’t be modified by changes in the market, and can’t be cancelled because of a poor claims experience.

ANNUAL TURNOVER BASIS

Also known as Transfer or Cut-off policies.

Annual turnover basis policies insure projects currently underway or started during the 12-month policy period – but only covers them within the 12 month policy period.

That means that if any projects aren’t completed within this period, they’ll no longer be insured when the policy period ends, unless you renew your cover.

If the insurance market pricing is trending down, this could save you money – but if premium rates increase, renewal could cost you more than the previous year. What’s more, excess levels may change when you renew. Worse still, if claims have been high, cover may be cancelled by an insurer.

Your premium is based on your actual annual turnover, which is calculated based on the annual turnover from all your insured contracts during the policy period. This means that the first year of cover may be cheaper than taking out cover on a run-off basis. But, in the end, the amount you’ll pay will be the same as if you took out cover on a run–off basis if the rates for the Annual Turnover policy don’t alter.

TIPS FOR KEEPING TRACK OF YOUR COVER
  • When a policy starts, make sure you have a list of all the contracts you have underway, with each project’s type, location, total contract value, value of works completed to date, and their start and expected completion date listed. That way, you can make sure that every project is insured, and for the right amount.
  • Make sure your policy adequately covers each contract’s type/description, maximum contract value and construction period, and maximum defects liability period.

Get in touch

If you’re in construction, talk to MECON Insurance today about our unique range of insurance options that can extend your cover to provide the protection you need.

Brisbane | Sydney | Melbourne | Perth

This product is issued by AIG Australia Limited (AIG) ABN 93 004 727 753, AFSL 381686.

This is general advice only. Please consider your own needs, financial situation and objectives and read the policy wordings available from www.mecon.com.au before deciding to buy this insurance.

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