Sum insured (construction)
The sum insured is the maximum a contract works insurer will pay. Set it to the full reinstatement value or an average clause can cut a partial-loss payout.
Ask Chalkline about this →Sum insured in construction is the maximum amount an insurer will pay under a contract works (construction all risks) policy: the value the works are insured for if they are damaged or destroyed during construction.
What it should cover:
- The full contract value of the works.
- Materials on site, and often materials in transit or stored off site.
- Allowances commonly added on top: demolition and debris removal after a loss, professional fees (re-design and supervision to rebuild), and escalation (cost rises during a long reinstatement).
The underinsurance trap: if the sum insured is less than the actual cost to reinstate the works, an average (co-insurance) clause can cut the payout proportionally, even on a partial loss. Insure for the full reinstatement value, not the tender price less a margin. On a cost-plus or long-duration job, review the sum insured as the value grows: a figure set at contract signing can be well short by the time the build is near complete.
Who sets it: whoever arranges the contract works policy (the builder or the principal, depending on the contract) nominates the sum insured. Check the contract for who insures the works and to what value.
Common defect: insuring only the building contract sum and leaving out demolition and removal, professional fees, and escalation, so a total loss leaves a shortfall the builder or owner has to wear.
Also known as: insured value, declared value.
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Last updated: 2026-05-24. Verified: 2026-05-24. Quarterly review for currency.