Contract Works Insurance

About contract works insurance and contractors all risk builders cover

 Contract Works Insurance Explained

Simon Taylor

Chartered Insurance Broker Reviewed 08/07/2023

Contract works insurance provided under a contractors all risk insurance policy will help reinstate or repair the building works in progress resulting from any damage before responsibility has been handed to your principal


What is contract works insurance?

Contract works insurance protects you against accidental loss, damage, or destruction to the work in progress on a building site. If you are building a new house or extending a property on behalf of a client and the new structure you've built is destroyed or damaged before it is finished. As a builidng contractor you are potentially liable for damage up until the project has been completed. Contract works insurance, typically provided under a contractors all risk insurance policy will cover the cost of the additional labour and materials required to put the new structure back into the position before the damage occurred.


What does contract works insurance cover?

Contract works insurance can cover the cost of repairing building work on a construction site. Contract works is typically provided on an 'all risks' basis, which means the policy will not name the insured perils required to trigger a claim under the policy. This is the broadest cover availbale and protect the building works from events such as a fire, flood, storm, vandalism and theft. The cover can be extended to accidental damage to on-site materials, plant, equipment, tools and personal effects. 

What does contract works insurance not cover?

It's important to note if you are building an extension, the existing structure will not be covered and should be insured by the property owner. Contract works insurance will cover loss or damage to the new structure and building materials. If cover is required for the existing structure, please make the specific request and we can seek to provide confirmation the cover has been granted. Note this cover will only only be made available to housing extensions.

Do i need contract works insurance?

The cover is arranged to protect the financial interest in the building works. With many different parties involved in construction projects, it's important that everyone knows who is responsible for arranging contract works insurance. For example, six months into a a new house build a fire destoys the building completely, both the main contractor and the client will have suffured a financial loss. Therefore, it is common practice to have a contractors all risk insurance policy on a joint names basis which protects all parties insurable interest in the building works whilst in progess. This may also include a financier to be named as an additional insured or a first loss payee under the policy.

We recommend you refer to your contracts to ensure you fully understand your obligations and that you communicate these clearly with your client. However it is common for the main contractor to arrange the necessary contract works insurance on behalf of the client even though it's their responsibility under contract.

 Contract works builders insurance

How much does contract works insurance cost?

The cost of contract works insurance depends on a few things, the type of work you carry out, the scale of the project, and the level of construction insurance required. The cover level is the total cost of your largest project including the cost of labour and materials. A contract works insurance policy can be a stand-alone policy or combined with public liability, employers' liability, tools, and hired in plant insurance, depending on the nature of your business and your requirements.

 Contract value

Contract value

The maximum size of the contract you will be undertaking should mirror the sum insured, the higher the cover the more expensive premium.

 Building construction

Building construction

Timber framed, modular construction, high rise buildings, commercial and industrial projects, will all increase the cost of contracts works insurance.

 Building environment

Building environment

If the building site has a greater exposure flood, storm, or theft, insurers want to better understand how you have sought to mitigate the risk.

How to buy contract works insurance? Talk to a specialist insurance broker about your needs

Cover for contract works can start at £468 annually, or you can combine with your public liability insurance

What can a contract works insurance policy cover?

Contract works

The core cover offered is contract works insurance which offers protection against accidental loss, damage, or destruction to the work in progress on site. Covering the cost of the additional labour and materials required to put you back in the position you were in just before the damage occurred.

Own plant or equipment

A contract works policy can also insure your plant or equipment against things such as accidental damage, fire, and theft. Own plant is usually covered in the UK and while in transit. The sum insured on the policy will be the market value of the machinery.

Hired-in plant or equipment

A contract works policy can also insure hired in plant, which could be large, or specialist machinery brought in to complete a job. If you hire machinery the conditions of hire can make you responsible for the plant while it is in your possession. Own plant insurance gives you peace of mind if the plant is damaged, lost, or stolen. The premium is based on your annual hire charges.

The lender has requested to be named as a first loss payee

Where there is a lender or someone with a financial interest in a property a clause can be added to a contract works insurance policy called “first loss payee” this gives lenders control over the payment of claims which means the insurer is required to make payment to the lender directly i.e., the lender gets paid first. There is sometimes a monetary limit so small claims are paid without delay or consultation.

Project specific contract works

To add a first loss payee to a contract works insurance policy, insurers will only provide cover on a project specific basis. They need to know the site address of the build, duration of the contract, the value of the contract, full registered company name of the lender and address.

Additional information to secure cover

If you have created a new company or SPV for the build, insurers will want a bio of the principals to appreciate if there is sufficient experience to manage the project. It is also preferable that site plans, a Gantt chart, fire safety controls, and flood risk assessments are also provided.

Frequently asked questions

How much contract works insurance do you need?

It is always important to buy the right level of cover, your contract works insurance sum insured should be the total cost of your biggest project, including materials and labour. It is important to get this right to avoid underinsurance.

How much as contract works insurance cost?

The price of your policy is then calculated on the contract value, the type of project, and any additional security features. Timber frame projects, modular builds, flood zones, and high value building projects, can have a significant impact on the price and availability of cover.

What's the difference between contractors all risk insurance and contract works?

A contractors all risk insurance policy will always include contract works insurance. The two seperate terms commonly mean the same insurance cover, however contractors all risk insurance can also include additional construction insurance covers.

Can you provide an example contract works insurance claim?

Here are some of the types of claims we see on contract works insurance policies. (1.) A site is broken into, and an excavator is stolen. (2.) A storm causes damage to the roof of a house undergoing renovations. (3.) A generator is stolen from a trailer while parked in the services on its way to the site.

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