Wrap-Up Insurance: Definition, 2 Main Types, and Coverage Example

Wrap-Up Insurance

Investopedia / Paige McLaughlin

What Is Wrap-Up Insurance?

Wrap-up insurance is a liability policy that serves as all-encompassing insurance that protects all contractors and subcontractors working on large projects costing over $10 million. The two types of wrap-up insurance are owner-controlled and contractor-controlled. 

Owner-controlled insurance is set up by the owner of a project for the benefit of the builder or contractor to cover all listed contractors. The general contractor, meanwhile, may use a contractor-controlled insurance program to extend coverage to all the contractors and subcontractors signed up on the project.

Key Takeaways

  • Wrap-up insurance is a liability policy that acts as all-encompassing insurance protecting contractors and subcontractors.
  • Owner-controlled insurance is set up by the owner of a project for the benefit of the builder or contractor to cover all listed contractors. 
  • A contractor-controlled insurance program extends coverage to all the contractors and subcontractors signed up on the project.

Understanding Wrap-Up Insurance

The intent of a wrap-up insurance policy is to provide peace of mind that everyone involved in a project is insured properly. Wrap-up insurance is sweeping blanket coverage that protects the owner, contractors, and subcontractors. Wrap-up insurance is important because it avoids the need for every contractor and subcontractor to obtain their own liability insurance. If there were several policies, there might be gaps in the coverage or insufficient limits. Instead, wrap-up insurance is more effective at making sure that all of the liability risks are covered adequately.

For example, consider an owner-controlled insurance program purchased by the owner on behalf of the builder or contractor. Counting add-ons, the insurance includes workers compensation, general liability, excess liability, pollution liability, professional liability, builder's risk, and railroad protective liability. While the cost of wrap-up insurance can be expensive, the cost can be divided among the general contractors and sub-contractors.

Types of Wrap-Up Insurance Coverage

Wrap insurance covers a number of risks for you, your project, and your workers. Policies can vary, but may include:

General Liability with a Broad Form Endorsement

This covers all liabilities for a project, including bodily injury coverage against third-party injuries that occur on the site or if those injuries are the result of work-related activities by the contractor, subcontractor, or owner. Also, it protects third-party property against damage caused by anyone covered under the policy.

Builders Risk 

Builders risk covers for any water, weather, and fire damages to a building under construction. In other words, builders risk is essentially the same as property insurance except this covers buildings under construction.

Umbrella Liability 

Umbrella insurance provides coverage beyond the coverage limit for a general liability policy. For example, let's say a general liability policy covers up to $2 million in damages and the umbrella liability policy provides $10 million in coverage. If there was a $8 million dollar claim, the general policy would cover first $2 million while the remaining $6 million from the claim would be covered by the umbrella policy.

Workers' Compensation

Workers' compensation provides coverage for workers' compensation insurance to all of the enrolled contractors or subcontractors on the project.

Commercial Vehicle

Commercial vehicle insurance covers cars, vans, trucks, or specialty vehicles used on the construction project against liability claims and property damage.

Property Damage

This covers property damage of all the parties named on your policy. Also, equipment floaters for specialized equipment and tools can be added as well as inland marine insurance for tools and equipment that has been transported to and from the job site.