What every builder needs to know about insurance

Builders are being urged to check the small print before taking out insurance or they could be putting themselves and customers at risk.

Around half of all builders and contractors do not have the right cover in place due to not being passed on the correct advice by comparison sites.

Inadequate cover puts contractors and homeowners or developers who hired them at risk of liability if things go wrong on the project.

The use of insurance comparison websites often leads to tradespeople in the building and construction sector buying an inadequate policy.

By working with specialist construction brokers, such as ConstructionInsure, which has extensive industry knowledge, builders and contractors could avoid this problem.

Insurance is a minefield, but when you’re working in a highly dangerous industry like construction, then it’s vital that you have all the right cover in place.

Buying your insurance through price comparison sites may find a builder a cheap deal, but that does not mean the cover is adequate for their line of work.

Builders’ public liability and employers’ liability are both covers a builder must have. They protect against third-party injury or death, damage to a property as the result of a project and staff being injured or falling ill as a result of work.

Other covers listed below may or may not be included within your policy, so it’s always worth checking. They give that extra protection against loss of tools and equipment, sickness and loss of earnings and legal expenses.

Here are the different types of cover builders should be considering and taking out:

  1. Public liability This cover protects against the injury or death of third-party people or damage to a property as a result of a project. Premiums will be based on the work being carried out, the size of the firm and claims record. An indemnity limit for £5m is the average.
  2. Employers’ liability This cover protects staff from being injured at work, as well as former employees who have become ill as a result of their work while they were in employment. You cannot trade without this cover. 
  3. Product liability This covers against claims of personal injury or property damage from products made or supplied by the builder.
  4. Contract works This can be taken out by any trade. It covers the cost of contracts on residential and commercial property when undertaking new builds or extensions/alterations to property. For instance, during the build, if there is a fire, flood, storm, vandalism or theft, contract works would cover the cost to rectify the damage done.
  5. Contractors all risk This includes cover for contract works, own plant and hired in plant, but not liability.
  6. Contractors’ combined covers for all of the below:

a) Public liability Cover starting from £1m and ranging above £10m on a bespoke basis.
b) Employers’ liability Cover starting at £10m.
c) Contractors all risk This includes cover for contract works, own plant and hired in plant.
d) Contract works Covering the cost of the contract. 

  1. Legal expenses This covers costs linked to compensation awards, employment disputes, compliance and tax investigations.
  2. Tools and equipment This insurance covers the costs related to damage or theft of tools and equipment.
  3. Professional indemnity Covers against claims of professional negligence, especially for design and construct.
  4. Personal accident and sickness This is aimed at construction business owners and provides cover for costs that come from being unable to work full-time after an injury or illness.
  5. Business interruption This covers costs and loss of income if you’re unable to operate due to illness, injury or other issues outside your control, such as flooding, fire or theft.
  6. JCT insurance A joint named contract usually known as a 21.2.1 protecting against any non-negligence claim from the client or neighbouring property.
  7. Structural warranty insurance/latent defects insurance This is usually required by property developers, finance providers or new-build contractors. The JCT will cover workmanship or material issues and faulty design or defects for up to a period of 12 years of practical completion by repairing, replacing or strengthening the property. This insurance is necessary for all new-builds, any building adding over 50% of its current size and any change of use, for example, from commercial to residential. With this, it allows much more of an easy sell on completion of works or when the property is to be sold.
  8. Unoccupied property insurance Making sure the property being worked on is covered and the insurers are aware of all works being carried out.

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