Understanding CCIP and OCIP: Comprehensive Construction Insurance Solutions

July 8, 2024
5 Min.
Understanding CCIP and OCIP: Comprehensive Construction Insurance Solutions

Construction sites involve heavy machinery, materials, and skilled labor collaborating to complete projects. All the projects come with their risks and exposure and thus insurance serves as a way to safeguard stakeholders and investments. Normally, each contractor and party involved in a project has their own insurance policies. However, this decentralized approach creates the problem of duplication of coverage and conflict between insurers when an insured event occurs.

Wrap-up insurance addresses these complexities by integrating and bundling coverage so that all construction participants including builders and subcontractors are in one policy. Wrap-up insurance, called the Controlled Insurance Program (CIP), is an umbrella insurance policy mostly used when handling large construction projects.

Wrap-up insurance includes general liability, workers' compensation, and sometimes excess liability coverage. This policy is usually handled by the project owner (OCIP-Owner-Controlled Insurance Program) or by the general contractor (CCIP-Contractor-Controlled Insurance Program).

What is CCIP?

A Contractor-Controlled Insurance Program (CCIP) is an insurance plan wherein the general contractor or project manager purchases insurance for all the contractors and subcontractors involved in a specific project. The contractor arranges and controls the insurance risks related to the project. Unlike traditional insurance policies, which require each contractor to obtain coverage, a CCIP combines multiple coverages into one comprehensive package.  

The general contractor manages the insurance policy and makes decisions on important aspects. It involves an insurance broker, policy administrator, carrier, policy terms relating to claims, and legal representatives. This centralized control simplifies the insurance process and ensures all parties work together.

Similarly, CCIPs are cheaper than traditional insurance because they involve the consolidation of multiple coverages into a single policy. They decrease the overhead costs and are more effective in handling the insurance requirements. 

Benefits of CCIP

  • Insurance is included in the project budget, requiring no extra approvals.
  • Provides broad protection for all project stakeholders.
  • Simplifies insurance management for the General Contractor.
  • Enhances site safety through better coordination and protocols.
  • Supports small businesses by including them in the coverage.
  • Reduces the risk of coverage gaps.

What is OCIP?

An Owner-Controlled Insurance Program (OCIP) is a specific policy belonging to the property owner or a construction project. While contractors control CCIP, an OCIP gives control of insurance obligations to the project owner. OCIPs grant extensive coverage for property loss and damage, personal injuries, and other risks associated with construction. It can provide coverage to the contractors and subcontractors and can also encompass owners’ employees and third-party claims.

OCIPs are especially advantageous in large construction projects where the owner wants to have full control of insurance matters. They are also useful in areas where safety concerns and risk management procedures are crucial to a project. Likewise, OCIPs are helpful and functional at all stages of the construction phase.

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Benefits of OCIP

  • Complete coverage for all project participants under one policy premium instead of managing multiple bids from contractors and subcontractors.
  • Gives the owner more oversight and control over insurance matters, including claims management and coverage terms.
  • Maintains management of administrative fees and insurance costs with a single insurer or broker.
  • Lower costs by securing an OCIP for multiple projects.
  • Protects from various liabilities throughout the project.

How much does OCIP and CCIP cost?

OCIP and CCIP insurance cost depends on some parameters including the project size, the project, the geographical location of the project, and the type of construction involved. Usually, OCIP and CCIP premiums cost between 2% to 12% of the total construction cost.

OCIP, which project owners usually fund, tends to be more expensive than CCIP due to its comprehensive coverage. Likewise, CCIP expenses range from 1% of the construction budget and may rise to 2%. They include operational risks such as accidents and damage to properties in the project.

Additional factors impacting the final cost include project duration, subcontractor involvement, and any specialized insurance needs unique to the project. However, to ensure you get the most precise cost that will suit your project, it is wise to ask for a quote from an insurance company. It provides a better understanding of the available coverage and helps in decision-making regarding insurance investments.

What do OCIP & CCIP cover?

OCIP and CCIP programs simplify insurance coverage for everyone involved in construction. It minimizes coverage gaps, disputes, and administrative burdens by consolidating coverage under one policy, which facilitates smoother project execution and risk mitigation.

OCIP and CCIP cover several critical aspects of project insurance: 

  • General Liability Insurance: Protects against claims of bodily injury or property damage caused by the project's operations. It covers legal defense costs, settlements, and judgments arising from lawsuits.
  • Umbrella Insurance: Both programs provide additional liability coverage beyond the limits of primary insurance policies. They offer an extra layer of protection against destructive claims.
  • Workers' Compensation Insurance: They cover medical expenses, lost wages, and rehabilitation costs for workers injured on the job site. It ensures compliance with state requirements for worker injury compensation.
  • Completed Operations Coverage: OCIP and CCIP extend coverage for a specified period after project completion, protecting against claims arising after the construction work.
  • Builders Risk Insurance: Insures the project structure and materials against risks like fire, vandalism, and natural disasters during construction.
  • Operational Coverage: They offer industry-specific or region-specific coverage for risks such as earthquakes, floods, or other environmental hazards.

OCIP vs CCIP: What is the Difference?

OCIP (Owner Controlled Insurance Program) and CCIP (Contractor Controlled Insurance Program) are insurance plans that address risk and liability issues in construction projects but differ in several ways. 

OCIP is mainly funded by the owner and provides coverage from the start to the end of the project. It protects the owner, contractor’s employees, subcontractors, and any other third parties that have claims against a project. On the other hand, a CCIP is purchased by the contractor and usually provides more limited coverage, effective only for the specific project. CCIPs primarily cover the contractor and their subcontractors.

OCIP policies are managed by the asset owner’s administrators, giving the owner more control over policy details and management, which can lead to higher costs but ensures extensive coverage. CCIP policies, on the other hand, are controlled by the contractor team which may be cheaper, presuming the contractor has a good record on safety.

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Similarly many asset owners fail to start OCIPs because they do not have continuous policies with insurers. Therefore, they begin negotiating for a new OCIP for every work project. On the other hand, the general contractors who work on specific types of projects negotiate rolling CCIP policies with insurers. It reduces the amount of work required for new policies.

Here is the difference table between OCIP and CCIP:/

Aspect OCIP (Owner Controlled Insurance Program) CCIP (Contractor Controlled Insurance Program)
Policyholder Property owner General Contractor
Control The property owner controls and tailors the insurance coverage to fit the project’s specific needs. The general contractor manages and controls the insurance coverage, focusing on the contractor's perspective.
Coverage Provides coverage for all contractors hired directly by the property owner Covers contractors within the general contractor’s contract chain.
Typical use Best suit for large-scale projects valued at $100 million or more. Any construction where the general contractor prefers to control the insurance.
Advantages Centralizes insurance costs into a single policy, reducing administrative overhead. Allows general contractors to control and manage the overall safety program.
Disadvantages Requires upfront documentation and project details to obtain coverage. Lengthy negotiation process with subcontractors to integrate insurance into their bids.

How to choose the right insurance program for your construction project?

Insurance programs are essential in the construction industry to protect against various risks and liabilities that can arise during a project. It provides a safety net for contractors, subcontractors, project owners, and workers, minimizing unexpected costs and legal issues and promoting smooth project progress. Therefore while choosing the right insurance for your construction project companies must consider various factors. Here are some of them:

  • Identify your Project: First begin by accessing the size, scope, and specific risk associated with your construction project. Factors such as project type, location, duration, and complexity will influence the insurance requirements.
  • Control and Management: Decide whether the project owner or the general contractor should have control over insurance management. OCIP gives owners direct oversight, while CCIP allows contractors to manage insurance protocols.
  • Project Size and Scope: OCIP is more advantageous for large-scale construction projects due to potential cost savings and streamlined administration, while CCIP may be more appropriate for smaller to mid-sized projects where contractors can manage their own insurance.
  • Risk Management: OCIP provides all project participants with comprehensive coverage and consistent insurance standards. It particularly benefits projects with high inherent risks or complex environmental factors. Contractors with specialized risk management expertise or specific insurance preferences should use CCIP.

Kwant AI Goes Beyond Wrap-up Insurance Programs

As mentioned earlier, extensive coverage and the ease of insurance make wrap-up insurance ideal for massive construction projects. But if you apply Kwant’s construction safety technology, you will be able to achieve even more benefits.

Kwant’s innovative system goes beyond basic insurance by leveraging smart wearables and workforce management software. It provides real-time data on worker activity, location, and potential hazards on the construction sites. You can improve your safety record by identifying risks and mitigating them before they become incidents.

In this way, Kwant’s safety smart wearables can help owners and contractors reduce insurance costs, including wrap-up insurance. It has the potential of minimizing risks on construction sites and hence improving the welfare of construction workers as well as all the project stakeholders. It also helps simplify compliance in monitoring worker certification and training.

Ready to see how Kwant can transform your construction safety and unlock these benefits? Request a free demo today.

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