Building contractors require many different types of insurance in place to help cover all eventualities. Construction is a high-risk industry, hence construction insurance can be quite complex and cost a premium. If they are underinsured, contractors run the risk of having to pay from out of their own pocket in the event of a claim. Here are the most common types of construction insurance which need to be considered:
Public Liability Insurance
This will cover you for claim costs or legal fees that occur from any third-party material damage or injury caused by your own negligence.
If you are responsible for causing personal injury to clients or members of the public, or for damaging property, public liability insurance will cover legal costs, medical expenses or compensation. In a high-risk industry and workplace such as construction it is paramount that you be fully covered.
Professional Indemnity Insurance
This traditionally insures contractors for any compensation costs or legal fees resulting from third party financial loss due errors or omissions in professional activities, such as:
- Design or specification.
- Feasibility study.
- Inspection, testing, commissioning or certification.
- Surveying or calculation of technical information.
- Training or consultancy (for a fee).
Similar to Public Liability Insurance, Professional Indemnity Insurance will also insure you for third-party property damage or injury if it is caused by negligent professional error or omission. It will not cover you for any defective workmanship or materials used in a build though.
Contractors need to be careful here, as they will often sub-contract professional activities to others – such as architects or engineers. Whilst they can sub-contract the work, they can’t sub-contract the contractual responsibility for negligence and would still need insurance to cover off this risk.
Professional indemnity insurance is important for many business types. This type of insurance is not strictly a legal requirement however it could keep you and your business afloat in case of a mistake.
Plant and Equipment Insurance
If you are hiring in plant there is likely a stipulation within your hire agreement which requires you to have contractors plant insurance in place.
This will provide cover for any loss or damage of equipment (excluding breakdown) that you’re hiring in or hold responsibility over. If you own a plant that needs to be repaired or replaced, you’ll be covered too. The premium is calculated on total market value of the owned plant and the estimated annual hire charges.
Often you can extend the policy to include key loss, security devices, recovery costs, repair costs and negligent breakdown cover. This can be a very expensive piece of kit, so make sure you aren’t underinsured, but instead are fully covered by your provider.
Employers’ Liability Insurance
If your business employs staff (permanently or temporarily) you are legally required to have Employers’ Liability Insurance. This will ensure you are protected against any claims for injuries or illness caused by directly working for your business. In such a high-risk industry and workplace, this cover is essential for employers and business owners.
Employers may not need employer’s liability insurance if they only employ a family member, but for each day they are not properly insured, employers can be fined £2500. Employers must also display their employer’s liability certificate or be at risk of a £1000 fine.
Contract Works Insurance
Also known as course of construction (COC) insurance, contract works insurance is the cover for buildings and structures while they are under construction. This is a cover more often seen for only certain types of construction projects; they include new residential construction, commercial property construction, as well as model home building and remodelling.
The policies within the insurance are specific to the type of property being constructed. The policies can include cover for:
- Building materials.
- Temporary structures e.g. scaffolding.
- Paving, fencing, outdoor fixtures.
- Lawns, trees and plants which have been installed.
Insurers may offer premium coverage options which can extend the coverage limits. This is useful for covering high-cost unique structures in the eventuality of damages. However insurance providers may also specify exclusions in the contract works insurance under instances of policyholder negligence.
Because of the risk involved with construction projects, construction contractors pay some of the highest rates for liability of any profession.
Premiums can vary widely, that’s why it’s important to use a broker to ensure you get the best rate with the most trusted insurance companies.