MECON Insurance strives to create innovative solutions to help our insurance brokers better protect your clients, and Builders Advantage is the newest addition to the toolkit. After feedback from our brokers, we designed this endorsement to address concerns surrounding fixed-price contracts and project duration overruns.
Fixed-price contracts have been instrumental in some recently publicised building company collapses. In many cases, supply chain delays, increased material and labour costs and high inflation have conspired to blow-out the cost of fixed-price residential buildings. Fixed-price contracts are by their nature, fixed in price. The additional, and unexpected costs, caused by delays and increases in material and labour costs and inflation, do not alter the status of fixed price contracts (e.g. a $500k fixed price contract that blows-out to $600k, can cost the builder $100k. On an insurance schedule, the contract price remains fixed at $500k, which is the basis of the maximum pay-out under the policy. However, the true indemnity value is actually $600k).
How the MECON Builders Advantage Endorsement works
MECON’s Builders Advantage policy endorsement allows the value of fixed-price residential contracts to increase by up to 25% and the maximum duration to extend by up to 60 days (across both sections of the policy) – despite what is specified in the schedule. The endorsement is capped at the maximum aggregate of the total of all sums insured, but works seamlessly, specifically to offset the effects of increased costs on fixed-price contracts.
(Note, this is separate from MECON’s Variation Allowance of 20%, which is designed for non-fixed-price contracts where inflation and other cost increases are contractually permitted to increase the contract value and therefore the eventual sum insured).
For more info, contact your local MECON office.