Contract works insurance and contractors all risk insurance are often used interchangeably, however, architects, builders, project managers and employers should appreciate the subtle difference to ensure the correct protection is purchased.
Contract works insurance is just one cover available under a contractor’s all risks (CAR) policy. You can purchase a CAR policy without purchasing contract works cover, this may include covers such as employer’s liability, public liability and hired-in plant cover.
Contract works (as more fully described below) is the cover that can reinstate or repair the building works. Typically, the contract you agree (i.e., JCT) will more often than not, identify who is responsible for insuring the work in progress.
What covers are available under a contractors all risk insurance policy?
The below guide explains the main coverage sections provided to contractors and builders when arranging the contractors all risk insurance:
What is contract works insurance?
Contract works insurance will protect the work in progress on a construction site in the event of damage before responsibility has been handed to the principal. Note if you are working on an existing structure, the existing structure will not be covered and should be insured by the property owner. Contract works insurance will cover any loss or damage to the property and materials.
What is public and product liability insurance?
Public liability insurance
and product liability insurance
protects against claims arising from injury or property damage of persons other than your employees (i.e. customers, suppliers, contractors or third persons) in the course of your construction activities.
What is employers liability insurance?
Employers liability insurance
protects against claims arising from injury or illness of your employees. Note all companies under UK law have a legal duty to protect the safety of their employees at work. It is one of the few types of insurance compulsory in the United Kingdom.
What is own plant and equipment insurance?
Own plant and equipment insurance protects against damage to own plant and equipment whilst in your custody or control or hired out under a defined agreement. For example: scaffolding, temporary buildings, site office contents and site welfare facilities.
What is hired-in plant and equipment insurance?
Hired-in plant and equipment insurance will protect your legal liability under the terms of your hiring agreement to pay compensation for damage to hired-in plant, whilst in your custody or control.
What is employee tools insurance?
Employee tools insurance will protect against damage to personal tools and effects belonging to an employee, or principle. Cover can vary from policy to policy, so consider whether you have the protection you need.
Are there additional construction covers that can be provided under a contractors all risk policy?
The below guide explains what additional coverage sections are sometimes purchased by contractors and builders under a contractors all risk insurance policy:
What is non-negligence insurance?
Non-negligence insurance, otherwise known as JCT 6.5.1, protects against claims should there be damage to a neighbouring property due to the works carried out arising from collapse, subsidence, heave, vibration, weakening or removal of support, or lowering of groundwater, which is not the result of negligence.
What is business interruption insurance?
Business interruption insurance protects against the loss of income from being unable to trade as a result of an insured event (i.e. property damage). The contractor's all risk cover will protect against the consequential loss of the interruption to trade by indemnifying the policyholder for the loss of income as a result of the insured peril.
What is personal accident insurance?
Personal accident insurance will in the event of an accidental bodily injury to any insured person, provide financial support as defined in the policy schedule. Benefits will be payable for death or disablement and related medical expenses.
What is terrorism insurance?
Terrorism insurance protects against loss from damage to property and potentially consequential loss resulting from acts of persons which carry out activities directed towards the overthrowing or influencing, by force or violence, of any government.
What is legal expenses insurance?
Legal expenses insurance can assist your business with expert legal advice through a telephone legal advice service. In the event of a claim, the contractor's all risk cover will offer access to legal advice in a range of circumstances, typically relating to your property, employment, or contract disputes.
Who needs contractors all risk insurance on a building site?
Anyone working on site should consider purchasing contractors all risk insurance. Which covers you decide to purchase will depend on a number of factors including your responsibilities, contractual requirements, size and risk appetite.
Your contract with the principle will typically set out the responsibilities of each party, including who is contractually obliged to insure the various elements of the build. Talk to a specialist construction insurance broker about your individual requirements.
Contractors all risk insurance is also commonly referred to as tradesman insurance, the covers available under the policy are the same and will accommodate construction companies with up to 10 employees.
How is your contractors all risk building insurance cost calculated?
How insurers calculate your contractors all risk building insurance cost will depend on a number of factors, including which insurer we approach on your behalf.
However, there are common areas that underwriters will focus on calculating your contractors all risk insurance cost, as detailed below:
Allocation of turnover and wages between different construction activities and the perceived exposure attaching to each can impact your insurance premium.
Turnover generated and allocation between 1) new build and existing works; 2) residential, commercial and industrial works can impact your insurance premium.
The nature and size of your largest projects, this will indicate the level of exposure posed, large scale construction projects typically carry increased risk.
Working at a height
of more than 6 meters above floor level, working with heat, making excavations or using industrial machinery.
Frequency and severity of claims with a lack of remedial action, can indicate a lack of risk management and will significantly change your insurance pricing.
Contractors All Risks Insurance FAQs
Do you need an annual contractors all risk insurance policy or project specific?
Contract works under a contractors all risk insurance policy will typically be purchased on an annual basis by the respective parties, for their own needs.
An annual contract works policy will cover all work undertaken in that year, up to a maximum contract value per project. This is usually the most cost-effective solution for contractors who typically undertake multiple projects each year.
Larger projects may prefer to arrange their CAR insurance for all parties on a project specific basis. However, issues can arise if there are delays in construction and this extends past the agreed policy period.
Who should purchase the project's contract works insurance cover?
Your contract with the principle will typically set out the responsibilities of each party, including who is contractually obliged to insure the various elements of the build under a contractor’s all risk insurance policy.
JCT contracts are the mostly commonly used in the UK and will identify what insurance covers you are required to purchase and who's responsibility they are. It's worth considering that its easier for the contractor to arrange the neccessary insurance protections.
First loss payee endorsements
Contractors all risk insurance policies can be structured in a way to ensure all parties are covered on a project, regardless of the damage or injury, or who was a fault. This can include 'first loss payee' endorsements for potential project financiers.