Three insurances carry most of the risk on a build: contract works insurance protects the physical works, public liability insurance protects against third-party injury and property damage, and workers compensation protects the people on site. A fourth, professional indemnity insurance, sits behind the design. For a property developer, the question is rarely “what does each policy cover” in the abstract. It is “who is carrying this on my project, is the cover actually mine to claim on, and what happens in the weeks where nobody’s policy is responding”. That last one is where deals bleed money.
The friction is real because the developer and the builder each hold different pieces, and the pieces do not always meet cleanly. A builder’s contract works policy usually ends at practical completion. The developer still owns unsold, completed stock for months after that. A subcontractor turns up uninsured, and the liability lands on the party who engaged them. The developer is not named on the policy that pays out, so the claim goes to the builder and not to the party who took the loss. None of these are exotic. They are the ordinary gaps that open on ordinary projects, and they change the cost and the risk sitting against your margin.
This guide sets out what each cover does, who is expected to hold it, how workers compensation differs across every state and territory, where the gaps open mid-project, and how to carry the cost in a feasibility. It leads with the Australian position and covers New Zealand, where the Accident Compensation Corporation (ACC) changes the picture entirely. This guide is general information, not financial, legal or insurance advice.
What insurance actually covers a property development, and who pays for it
A development build is covered by four insurances doing different jobs, and they are held by different parties. Contract works insurance and public liability insurance protect the project and the public during construction, and are usually arranged by whoever the contract says arranges them, most often the builder. Workers compensation is always the employer’s responsibility, so the builder covers its own staff and each subcontractor covers theirs. Professional indemnity insurance covers negligent design or advice, so it sits with the consultants and, on a design and construct (D&C) contract, with the builder who took on the design.
The developer’s exposure is not that it holds all of these. It usually holds few of them directly. The exposure is that the developer carries the loss if any of them fails to respond: if the works burn down and the builder was underinsured, if a passer-by is injured and the liability limit is too low, if a subcontractor’s uninsured worker is hurt and the liability climbs the contractual chain. The cost of getting this wrong does not show up as a premium line. It shows up as an uninsured loss against the project, and that risk attaches well before site start.
One cover sits outside this set and is worth separating out. Statutory home warranty insurance, known as the Home Building Compensation Fund in New South Wales and by various names elsewhere, is a consumer-protection cover a builder takes out on residential work above a threshold, protecting the end buyer if the builder dies, disappears or becomes insolvent. It is a different thing from the contract works, public liability and workers compensation covers this guide deals with, and its own thresholds and exemptions are set out in the home warranty insurance guide. It is an additional line on residential projects rather than a substitute for any of the three covers here.
The rest of this guide takes each cover in turn, then deals with the handovers between them, which is where developers get caught.
What is contract works insurance, and what does it actually cover?
Contract works insurance covers accidental physical loss or damage to the works while they are being built, from events like fire, storm, theft, vandalism, collapse, impact and flood. It covers the permanent and temporary works, materials on site and often materials in transit or in storage, and it is the policy that rebuilds a half-finished structure that burns down before handover. Australian insurers also sell it as Construction All Risks insurance, and in the domestic building market the two labels usually carry near-identical wording, as the broker Marsh explains in its contract works guidance.
Contract works insurance is commonly packaged with public liability cover, but the two do different jobs. Contract works protects the thing being built. Public liability protects other people and their property from the consequences of the build. They remain separate questions even when they arrive on one schedule.
Cover comes in two shapes. A single-project policy covers one build from site start to completion, and suits a developer running a defined project with a known contract value. An annual turnover policy covers all of a contractor’s projects across a twelve-month period, and suits a builder running many jobs at once. For a developer, the single-project policy is usually the relevant one to understand, because it is the policy that either the builder or the developer takes out for the specific site.
When does contract works cover start and stop, and where is the gap?
Contract works cover generally starts when site work begins and runs until practical completion or handover, as defined in the contract. That endpoint is the trap. Cover typically stops at practical completion, but the developer’s risk does not. A completed apartment building that has not yet settled to buyers, or a completed commercial building waiting on a tenant fit-out, is finished stock the developer still owns and still carries the loss on. If the contract works policy has lapsed at practical completion and no material damage or property owner’s policy has picked up, there may be a window where a fire or storm loss falls back on the developer directly.
Most contract works policies include a defects liability or maintenance period extension, which keeps a defined level of cover running through the defects liability period for damage caused by the contractor making good defects. That is useful, but it is not the same as full material damage cover on a completed, occupied or unsold building. What insures the building from practical completion through to settlement or handover, and who arranges it, is the point most often left unwritten. On a strata development, the owners corporation’s building insurance usually takes over on registration, but there can be a gap between practical completion and registration.
Does contract works cover the existing building on a renovation or extension?
Not automatically, and this catches developers on refurbishment and add-on projects. A standard contract works policy insures the new works. The existing structure that the new works attach to, the building you already own and are extending or converting, is frequently excluded or only covered by specific extension. If a fire during construction damages both the new works and the existing building, the contract works policy may pay for the new works and leave the existing structure uninsured unless an “existing structures” extension was arranged and the sum insured reflects the full reinstatement value.
For a developer buying a standing building to reposition, this is a cost and risk line that sits before demolition or works start. Cover for the existing structure comes either from an extension to the builder’s contract works policy at its full value, or from material damage cover the developer holds itself over the existing building. Where it is left ambiguous, a single event can turn into an argument between two insurers while the developer wears the shortfall.
What does public liability insurance cover on a development, and how much do you need?
Public liability insurance covers your legal liability to third parties for personal injury or property damage arising from the works. On a development site, that means a member of the public injured near the hoarding, a neighbouring building cracked by excavation or dewatering, a vehicle damaged by falling debris, or damage to a council footpath or public infrastructure. It is the cover that responds when the build harms someone or something outside the project, and the claims can be large, which is why the limit matters more than the premium.
Public liability insurance is not compulsory under a general law in the way workers compensation is, but it is effectively mandatory in practice. Construction contracts require it, financiers require evidence of it before releasing progress payments, and councils and road authorities require it as a condition of works affecting public land or infrastructure. So while no statute forces a developer to hold public liability cover, the developer is unlikely to get a bank drawdown or a road-opening permit without the project being covered.
How much public liability cover is enough for a development?
The common limits are $5 million, $10 million and $20 million, and the right number depends on the project’s exposure rather than its build cost. A standalone project on a quiet suburban block commonly sits at $10 million. A basement excavation next to a heritage building, a tower over a rail corridor, a site fronting a busy road, or anything adjacent to critical public infrastructure more commonly sits at $20 million or higher, because the third-party loss is not capped by your contract value. It is capped by how much damage the works can do to what sits around them, which is a conversation to have with your broker against the specific site.
Two things determine whether the cover actually reaches the developer: whether the limit is set against the worst credible third-party loss rather than the contract sum, and whether the developer’s own interest is covered rather than just the builder’s. A builder’s public liability policy protects the builder. Where the developer is directly engaging trades, running site activities, or wants a right to claim in its own name, that depends on being a named insured or an interested party on the policy, with a cross-liability clause so one insured’s claim is not defeated by another insured’s involvement. It is a drafting point that is cheap to settle before site start and expensive to discover after a claim.
Who has to carry workers compensation insurance, and does a developer with no staff need it?
Workers compensation insurance is compulsory for employers in Australia, subject to small-employer thresholds in some states, and it is the employer who must hold it, so on a development the builder insures its own workers and each subcontractor insures theirs. A developer that employs no workers directly usually has no policy to take out. The risk for the developer is not its own payroll. It is being pulled into responsibility for someone else’s uninsured workers through “deemed worker” and principal contractor rules, which is a real exposure the moment a developer starts engaging trades directly rather than through a single insured head builder.
Two mechanisms create that exposure. First, an individual subcontractor working substantially for one party can be a “deemed worker” of that party for workers compensation purposes, so a developer directly engaging a sole-trader trade may be treated as their employer if they are injured. Second, principal contractor liability makes the party at the top of a contract chain responsible for a subcontractor’s unpaid or missing workers compensation premium. In New South Wales, section 175B of the Workers Compensation Act 1987 makes a principal contractor liable for a subcontractor’s workers compensation premiums for work done under the contract, unless the principal holds a written subcontractor’s statement from that subcontractor.
How does a developer avoid being caught for a subcontractor’s uninsured workers?
The protection is contractual and documentary: a properly insured head builder sitting above the trades, and the paperwork that transfers the risk back where it belongs. In New South Wales, a completed subcontractor’s statement confirming the subcontractor has paid its workers compensation premiums relieves the principal contractor of liability for those premiums, and the same statement covers payroll tax and remuneration obligations. Every state runs an equivalent principle, so the position turns on whether whoever sits directly above the trades is properly insured, and whether certificates of currency and subcontractor statements are collected before work starts and kept current.
Where a developer takes a more hands-on role, acting as its own head contractor, directly engaging and paying trades, or running an owner-builder style project, it steps into the principal contractor position and inherits these obligations. That position carries the cost of holding the relevant cover and the administrative load of collecting statements, and it is a position some developers discover only after an injury on a site they thought they had contracted out.
Workers compensation state by state: the two models developers deal with
Workers compensation is set by each state and territory, and the schemes fall into two groups. New South Wales, Victoria, Queensland and South Australia run centrally managed public schemes, where cover comes from a single scheme insurer or its agents. Western Australia, Tasmania, the Australian Capital Territory and the Northern Territory run privately underwritten schemes, where employers buy cover from licensed private insurers competing in the open market. For a developer building across states, that means the insurer, the premium basis and the claims process change with the location of the work, not the location of the business. Safe Work Australia publishes the comparison across all schemes.
In New South Wales, cover is provided through the Nominal Insurer managed by icare and regulated by the State Insurance Regulatory Authority. Section 155 of the Workers Compensation Act 1987 makes a policy compulsory for employers, and section 155AA exempts small employers whose annual wages are $7,500 or less, who employ no apprentices or trainees, and who are not part of a group of related businesses for premium purposes.
In Victoria, cover is provided through WorkSafe Victoria via authorised agents under the Workplace Injury Rehabilitation and Compensation Act 2013. Registration is required where an employer pays or expects to pay more than $7,500 in remuneration in a financial year, or engages any apprentices or trainees at all. The average premium rate for 2026-27 is 1.8 per cent of the state’s rateable remuneration, with construction sitting among the higher-rated industry classifications.
In Queensland, cover comes from WorkCover Queensland under the Workers’ Compensation and Rehabilitation Act 2003, and an employer must take out an accident insurance policy within five business days of employing workers. Larger employers may apply to self-insure.
In South Australia, cover comes from ReturnToWorkSA under the Return to Work Act 2014. Employers who expect to pay less than the annual threshold, set at $16,806 in remuneration for 2026-27, may not need to register, though an injury still triggers a duty to register and pay the minimum premium.
In Western Australia, cover is bought from private insurers licensed by WorkCover WA, and the scheme now runs under the Workers Compensation and Injury Management Act 2023, which commenced on 1 July 2024 and rewrote the previous legislation with new timeframes for liability decisions and provisional payments.
In Tasmania, cover is bought from licensed private insurers under the Workers Rehabilitation and Compensation Act 1988, regulated by WorkSafe Tasmania. In the Australian Capital Territory, cover is bought from approved private insurers under the Workers Compensation Act 1951, and section 13 of that Act makes a principal liable for compensation to an uninsured contractor’s injured worker, with a Default Insurance Fund behind uninsured employers. In the Northern Territory, cover is bought from approved insurers under the Return to Work Act, regulated by NT WorkSafe.
The practical takeaway for a developer is that the obligation follows the work. If a project spans a state border, or a builder brings a crew across one, the workers compensation cover has to be right for the jurisdiction where the work happens, and a single national policy does not necessarily stretch to cover it.
Who carries what: the builder’s policies versus the developer’s
On most projects the builder arranges contract works and public liability insurance for the construction period, and the developer’s exposure turns on whether that cover is adequate and whether the developer’s interest is properly captured on it. This is the “contractor-arranged” model, and it is the default under standard construction contracts, where the contractor is required to insure the works and hold public liability cover to the amounts set in the contract. The alternative is “principal-arranged” insurance, sometimes called an owner-controlled insurance program, where the developer takes out a single contract works and public liability policy covering itself, the builder and the subcontractors together. Principal-arranged cover is more common on larger or more complex projects, because it removes the gaps between separate contractor policies and gives the developer control of the one policy that matters most.
Whichever model applies, workers compensation stays with each employer. A principal-arranged program does not sweep up workers compensation, because that cover is statutory and employer-specific. So even on a developer-controlled insurance program, the builder and each subcontractor still hold their own workers compensation policies, and the developer still needs the certificates and statements that keep principal contractor liability off its books.
What developers typically check before the first payment
The documents in play before a progress payment is released or work starts are current certificates of currency for the builder’s contract works, public liability and workers compensation cover, together with confirmation that the developer is named on the material policies. The specific items commonly checked are that the contract works sum insured matches the full contract value plus an allowance for demolition, professional fees and escalation; that public liability is set at a limit matched to the site’s third-party exposure; that the developer and the financier are named as insureds or interested parties on the contract works and public liability policies; that there is a cross-liability clause and a waiver of subrogation so the insurer cannot turn around and recover against the developer; and that existing structures are covered where the project touches a building the developer already owns. Financiers usually require most of this as a condition of drawdown in any case, though the list serves the developer’s interest and not only the bank’s.
Verifying a builder’s insurances also belongs inside builder due diligence more broadly. The strength and history of a builder’s cover, and whether its policies carry unusual exclusions or a poor claims record, is part of the picture when choosing a builder, alongside financial capacity and track record. A cheap builder with thin cover can be more expensive than a dearer one whose insurances actually hold.
Where the insurance gaps open up mid-project
The predictable gaps are at the handovers, where one party’s policy ends and another’s is supposed to begin, and where the developer’s interest is assumed rather than documented. These are the ones that recur on ordinary projects:
- The practical completion gap. Contract works cover typically ends at practical completion, but the developer owns completed, unsold or not-yet-registered stock for months afterward. What insures the building from practical completion to settlement, handover or strata registration is a separate arrangement from the contract works policy.
- Existing structures on a refurbishment. Contract works policies insure the new works, not always the building they attach to. On a conversion or extension, cover for the existing structure comes either from an extension to the policy at full reinstatement value or from separate material damage cover.
- Not being named on the policy. If the developer is not a named insured or interested party on the builder’s contract works and public liability policies, a payout may go to the builder even where the developer took the loss. That position is set in the contract, with a cross-liability clause.
- An underinsured public liability limit. A limit set to the contract value rather than the worst credible third-party loss can leave the developer exposed on a neighbour or infrastructure claim that dwarfs the build cost.
- An uninsured subcontractor. A trade that turns up without current workers compensation or public liability cover pushes liability up the chain. Certificates of currency and subcontractor statements collected before work starts are the defence.
- Professional indemnity run-off after completion. Design liability survives the build. Professional indemnity insurance is written on a claims-made basis, so a consultant or a design and construct (D&C) builder must hold current cover when a claim is made, which can be years after practical completion. On a design and construct (D&C) contract, whether the builder holds professional indemnity insurance and whether it runs for a defined period after completion is what a latent defect discovered in year three depends on, because that claim needs a live policy to answer it.
Professional indemnity insurance deserves a specific note because it is the cover developers most often forget. On a traditional contract the design sits with the developer’s consultants, and each typically holds professional indemnity cover at a level matched to the fee and the risk. On a design and construct contract the design responsibility moves to the builder, so the builder’s professional indemnity insurance becomes the policy standing behind a design failure. Either way, the developer’s interest is in confirming the cover exists, is adequate, and survives long enough to answer a claim that surfaces well after the site is handed over.
None of these gaps are about buying more insurance for its own sake. They are about making sure that for every stage of the project, and for every risk the developer actually carries, there is a live policy that the developer can claim on. That is a contract-drafting and paperwork discipline more than a premium decision.
What construction insurance costs, and how to carry it in a feasibility
As a rough order of magnitude, the three build insurances are a modest share of total development cost, but they are real cost lines and the exposure behind them is not modest at all. Single-project contract works premiums may typically run from a few thousand dollars to well over ten thousand depending on the contract value, the build type and the risk, broadly in the order of a fraction of one per cent of the contract value. Public liability cover at a $10 million limit may typically cost a smaller contractor somewhere in the hundreds to low thousands of dollars a year, rising with the limit and the site’s exposure. Workers compensation is charged as a percentage of the insured party’s remuneration, and construction classifications sit among the higher-rated, so it is a meaningful loading inside the builder’s cost base rather than a line the developer pays directly. These are indicative ranges only, and the actual numbers move with the project, the claims history and the insurer, so a broker quote against the specific job is the figure to model.
In a feasibility, most of these costs are already inside the numbers you are working with, which is why where they sit matters. Contract works and public liability premiums, where the builder arranges them, are built into the construction contract sum, so they are already part of the construction cost line rather than a separate item. Workers compensation is inside the builder’s rates for the same reason. What a developer more often models separately is insurance during the holding and pre-construction period, the cover over a site you own but have not yet started building, which behaves as an ongoing outgoing alongside rates and maintenance. That belongs with the other land holding costs in the model, carried explicitly across the holding period so the insurance-during-holding figure is not left out.
The larger point for feasibility is not the premium. It is the uninsured exposure. A gap in cover is a low-probability, high-severity risk against the project, the kind that a construction contingency exists to absorb only up to a point. Where the guide above shows a real gap, in cover over completed unsold stock, in existing structures, in an underinsured public liability limit, the more common response is to close the gap with cover rather than price the loss into contingency. Insurance premiums are a known, bounded cost. Uninsured losses are not, and they land where they do the most damage to a developer, which is against equity and margin rather than against a cost line.
How the standard contracts allocate insurance
Australia’s standard construction contracts put the insurance obligations on the contractor and set the amounts in the contract’s annexure, so the developer’s influence over cover is exercised at the contract-drafting stage. Under AS4000, the general conditions for a construct-only contract, and AS4902, the general conditions for a design and construct (D&C) contract, the contractor is required to insure the works, hold public liability cover, and maintain workers compensation for its employees, with the sums insured and limits filled into the annexure by the parties. Standards Australia released AS 4000:2025 on 30 June 2025, the first update in 28 years, so which edition applies, and what the insurance clauses in that edition require, varies with the contract in use.
The drafting choices that matter most to a developer are the amounts and the named parties. The annexure is where the public liability limit is set, whether against the site’s third-party exposure or a default figure carried over from another job. It is also where the requirement to name the principal on the contract works and public liability policies is captured, so a direct right to claim depends on the contract requiring it and the certificate of currency reflecting it. On a design and construct (D&C) contract, AS4902 adds the professional indemnity requirement for the design work, and the parties set both the level and the period of run-off cover, because the design risk it is transferring to the builder is only as good as the policy standing behind it. These are not boilerplate. They are the terms that decide who actually holds the risk when something goes wrong.
New Zealand: the Accident Compensation Corporation, contract works and public liability
New Zealand does not have workers compensation insurance, because the Accident Compensation Corporation (ACC) provides no-fault cover for work injuries funded by a compulsory Work levy. A New Zealand developer or builder does not buy a workers compensation policy the way an Australian one does. Instead, employers pay the Accident Compensation Corporation (ACC) Work levy, set by industry classification, and construction classifications sit at the higher end because of the injury risk. The line that reads as “workers compensation” in an Australian feasibility becomes a levy charged on payroll in a New Zealand one, rather than a separate policy you buy.
Contract works and public liability insurance still work as commercial-market covers in New Zealand, much as they do in Australia, and are typically required by the construction contract and the financier. One difference follows from the no-fault scheme: because the Accident Compensation Corporation (ACC) covers personal injury, New Zealand public liability policies are weighted toward third-party property damage, since bodily injury to others is largely handled by the scheme rather than by a liability claim. New Zealand’s building regulator sets out the practical position on insurance in construction contracts, and for a developer building on both sides of the Tasman the two markets differ genuinely on the injury side, even where contract works and property-damage liability look familiar.
A pre-start insurance checklist for developers
These are the questions that, before site work begins and before the first progress payment, either have a documented answer or do not:
- Who is arranging contract works insurance, is the sum insured the full contract value, and does it include existing structures where the project touches a building you already own?
- What insures the completed building from practical completion through to settlement, handover or strata registration, and is there a gap to close?
- Is public liability cover set against the site’s worst credible third-party loss, not just the contract value, and is the limit adequate for the neighbours and infrastructure around the site?
- Are you, and your financier, named as insureds or interested parties on the contract works and public liability policies, with a cross-liability clause and waiver of subrogation?
- Do you hold current certificates of currency for the builder’s contract works, public liability and workers compensation cover, and subcontractor statements where you need them to keep principal contractor liability off your books?
- On a design and construct (D&C) contract, does the builder hold professional indemnity insurance at an adequate level, and does it run for a defined period after completion?
- Where you operate across states, is workers compensation cover right for the jurisdiction where the work actually happens?
Insurance on a development is not a single decision made at the start. It is a set of handovers that each need a live policy the developer can rely on, from the pre-construction holding period through construction to the point where the completed building becomes someone else’s problem to insure. Where the covers, the amounts and the named parties are settled at the contract stage and the certificates are kept current, the gaps that cost developers money mostly close themselves.
This guide is general information for property developers and does not constitute financial, legal, tax, credit or insurance advice. Confirm the position for your project with your broker, your insurer and your contract adviser before you rely on it.