CONSTRUCTION INSURANCE

Construction Insurance

Abstract

In this study we try to explore the concept of “construction insurance” in a holistic context. The main focus of the research is on “construction insurance” and its importance for “construction project”. The research also analyzes many aspects of “construction insurance” and tries to gauge its impact on “construction project”.

Construction Insurance

Risk management

Risk management is a kind of management that is used for controlling or minimizing the risk. Risk management is the process to identify, assess and prioritized the risks, that how uncertainty affects on your objectives and goals and how a firm can monitor, minimize and control these probabilities of events. There are a number of risks that involve in a construction project, and every project in order to tackle the risk has to obtained insurance for its project in order to remain prepared from unpredictable losses (Bradford, 2010). However, it is pertinent to assess the risk involved in construction process, in order to enhance the understanding and importance of risk insurance.

Construction risks

The risks associated in normally every construction project are analyzed mainly in terms of overhead or time limits. A builder can also note that a delay in the construction leads mainly to additional costs for the company, either through (Clough & Sears, 1994):

Penalties that may be taken to pay the licensing authority or its customers based on their contractual commitments;

A delay in starting the operation of the project, which differs the first operating revenues, creating a shortfall;

An increase in borrowing costs (interest due during the phase of construction and that are capitalized).

Recall that when the additional costs or delays are caused by the government or the licensing authority, they are not considered here but like project risks associate with country risk (political, acts of government, amendment in the existing law). This is particularly true of modification of the functional definition of the project or the binding constraints on the choice of technical solutions after signing the contract. Changing standards for safety or environmental protection, delays in the approval procedures, delays on the approval or making disposal of land, or to customs problems prohibiting or delaying import of equipment or materials for the project are also considered serious risks for the project and builder has no control over these events, thus this makes builders entitled to claim compensation from insurance company for such events in case if they are insured (Levine & Haar, 2008).

Contract requirements

In a construction contract, a builder may agree on the construction of a single asset such as a bridge, a building, dam, pipeline, road, ship or tunnel. In a construction contract, a builder may also agree on the construction of a number of assets that are closely interrelated or interdependent in terms of design, technology and function or as to its purpose or end-use examples of such contracts include those related with the construction of systems of water supply systems, refineries and other complex infrastructures (Bell & Dudzik, 2009).

Legal requirements

The requirements of the IAS are applied separately to each construction ...