One government report states that, "According to insurance industry officials, wrap-up insurance can save project owners up to 50% on the cost of traditional insurance, or from 1% to 3% of a project’s construction cost." Wrap-up insurance may be a good deal for the project owner, but subcontractors often find it to be an expensive proposition because of slow payments and additional administrative burdens.
Subcontractors bear the added expense of purchasing insurance from multiple sources and ensuring that current policies are modified to complement wrap-ups. In addition, subcontractors incur extra costs for preparing and submitting payroll reports to general contractors. Subcontractors also lose the financial benefits of retrospective adjustments to their own insurance premiums, and lose control of back-to-work programs.