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With President Obama’s emphasis on shovel-ready construction projects, the need for wrap-up insurance programs–also known as controlled insurance programs (CIPs)–is expected to increase. Ideally, wrap-up programs can reduce cross-contractor litigation, provide safer conditions and offer broad coverage. But they also are complicated, requiring a great deal of attention to detail and the in-depth knowledge of insurance coverage issues, audits and experience modifiers that most contractors do not have.

There are hundreds of ways for prime contractors and subcontractors to lose money in wrap-up insurance programs. The savvy insurance agent will help contractors protect their profits.

Wrap-ups enable a project sponsor to purchase general liability, excess/umbrella, builders’ risk and workers’ compensation insurance for contractors and subcontractors on projects. In return, contractors deduct the costs of these insurance premiums from their bids.

These programs commonly are used on federal, state and county jobs–such as highways, military bases, prisons and airports–and large commercial projects, such as mixed-use hotel/shopping centers, apartment complexes and entertainment and sports facilities. There are several varieties of wrap-ups: owner controlled insurance programs (OCIP), contractor controlled insurance programs (CCIP) and rolling wrap-ups, which cover multiple projects. Without the guidance of an insurance agent, contractors and subcontractors are at the mercy of wrap-up administrators, routinely held hostage by confusing documents, additional paperwork and unexpected expenses.

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