Construction Insurance

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 What is construction insurance?

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What construction insurance do you need?

Construction sites pose numerous risks and hazards that can lead to accidents, property damage, and liability issues. Identifying these risks and arranging the correct construction insurance is vital to safeguarding your business. By understanding the potential risks, construction companies can take proactive measures to ensure a safe working environment and put in place the correct insurance policies.

Contractors all risk insurance

Builders all risk insurance, or contractors all risk insurance can is a package policy that mitigates liability risks on building sites and provide cover for damage or loss of the building works in progress on a construction site. Construction insurance cover is typically purchased by builders to protect against liability claims and property damage to the structure being built. With many different parties involved in construction projects, it's important that everyone knows who is responsible for insuring what.

Contract works insurance

The terms can be interchangeable within the building trade, however contract works insurance is the specific cover provider under a contractors all risk insurance policy which will reinstate or repair the building works resulting from any damage or destruction. If you are constructing a new build or extending an existing building and the new structure is destroyed or damaged before it is finished, the cover is there to provide financial protection against that loss or damage.

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The importance of construction insurance

Construction projects need insurance - Construction sites are prone to accidents and injuries. Construction insurance plays an important role in the construction industry for all the parties concerned. Construction projects typically involve significant investment and therefore risk. Construction insurance is therefore necessary to help protect against financial losses arising from property damage and legal liabilities.

Multiple interested parties - Construction contracts often require insurance coverage to protect all parties involved with an interest in the project. It’s common practice to have the main contractor and employer take out the policy on a joint names basis. Then they may also name the financier of the construction project on the policy as an additional insured, or first loss payee because they have an insurable interest.

Assists with winning tenders - Construction firms with comprehensive insurance cover promotes professionalism and risk awareness. Having appropriate construction insurance demonstrates compliance with contractual obligations and instils confidence in clients. It also allows you to provide the necessary comfort to your clients that you have sufficient protection in place should something go wrong.

 Insurance for construction companies

Common types of construction insurance policies

Construction insurance is typically a combination of covers designed to meet the needs of companies that undertake building work and traditional trades, such as a builder, electrician, carpenter, contractor, or plumber. If an unexpected accident occurs on site the cost of a liability claim, or property damage can have a significant impact to your business. We’ve put together the below guide for companies to help navigate the jargon and better understand what construction insurance you need to protect your interests and meet your legal and contractual obligations.

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Construction company insurances explained

Construction insurance for builders and contractors may include a variety of different insurance covers. The main covers will typically includes public liability, employers’ liability, contract works, own plan and equipment, hired-in plant, and professional indemnity.

Public liability

Otherwise known as general liability, public liability insurance can offer builders protection from compensation claims arising from injury or property damage of persons other than your employees. For example, a bonafide contractor falls within a trench that has been dug and causes a serious injury and claims for damages. The cover will protect the company against legal costs incurred in defending the allegation and pay damages from any award or settlement.

Employers' liability

Construction insurance is a legal requirement from most companies, employers' liability insurance can help offer builders financial protection from compensation claims arising from arising from bodily injury or illness of your employees. For example, an employee falls while climbing a ladder and is causes a serious back injury. The cover will protect the company against legal costs incurred in defending the allegation and pay damages from any award or settlement.

Contract works

Can help offer financial protection against the work in progress on a construction site in the event damage. Contract works insurance will reinstate or repair the building works resulting from any damage. For example, there is a fire at the construction site and works you have completed have been destroyed. The cover will reinstate or repair the building works resulting from any type of damage.

Plant & equipment

Can help protect builders against damage to own plant and equipment whilst in your custody or hired-in plant under your control or hired out under a defined agreement. For example, damage to your equipment, such as an excavator occurs during a construction project. The cover will protects against damage to own plant and equipment whilst in your custody or control or hired out under a defined agreement.

Professional indemnity

Construction insurance is recommended where your building firm provides design, or technical services to a client. It's worth noting that you can still be held accountable if you sub-contact the work. Therefore, as the main contractor, you should consider arranging professional indemnity insurance, whilst also ensuring that your professional subcontractor maintains the same amount of cover.

JCT insurance

The cover protects against claims should there be damage to a neighbouring property due to collapse, subsidence, heave, vibration, weakening or removal of support, or lowering of groundwater, which is not the result of negligence. JCT insurance will typically be arranged under a separate policy for a specified project.

Construction risk management and insurance

Construction sites are high-risk environments that present numerous hazards. Identifying and understanding these risks is essential for implementing effective risk management strategies, arranging the necessary construction insurance and ensuring the safety of the project.

Bodily injury risks

Construction contractors are exposed to increased risks relating to personal injury. The largest cause of accidents and ill health on a construction site typically arise from: (1) falls from height; (2) collapse of excavation; (3) collapse of structures; (4) exposure to asbestos or building dust; and (5) electric socks.

Property damage risks

Construction projects typically involve extensive use of plant, machinery, tools, and materials, increasing the likelihood of property damage onsite and offsite. Some common property risks include fire, explosions, structural collapse, water damage, vandalism and theft.

How much does construction insurance cost?

The premium that builders pay for contractors insurance will dependent upon a variety of different factors. For example, size of the firm, working at height, depth, or with heat will all increases your exposure to claims, therefore your construction insurance cost will increase. A significant factor for insurers in calculating your construction insurance premium, will be the percentage of your turnover paid to bonafide subcontractors. The higher the percentage means a greater responsibility onsite and higher exposure to public liability insurance claims.

For example - A basic tradesman insurance policy for a builder can start at £298 annually or £24.83 monthly for a small business that has one working director, one employee, and pays < 25% of turnover to subcontractors.

It's worth noting that certain business activities carry increased risk, such as: asbestos removal, demolition, hot roofing, pilling, scaffolding, tunneling, and underpinning. If the contract is in hazardous or high-risk locations this can impact the terms and premium insurers are willing to offer.

 Calculating construction project insurance costs

Additional construction insurance polices

Working in the construction industry can be a challenging and dangerous environment. This has implications your construction company and a range of parties you owe a duty of care. As a specialist construction insurance broker, we can identify the most appropriate cover (i.e. professional indemnity insurance) to meet your needs. 

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Quotes from the wholesale market can start at £468 annually or £39 a month

Construction insurance companies

We work with the leading construction insurance companies who can accommodate a wide range of projects and insurance lines. At Get Indemnity we are a specialist construction insurance broker who can navigate the market to identify the most competitive terms at the most affordable cost to your business. Speak with one of our account executives by requesting a call back or call on 0345 625 0711.

Specialist construction insurance broker

Insurance for construction companies is complex and without the guidance of a specialist construction insurance broker you may find your business uninsured when you need to rely on your policy coverage. Additionally, on a handful of insurers provide their products directly, therefore you aren't accessing some very competitive products and insurance companies.

 AIG Construction Insurance
 Allianz Construction Insurance
 AXA XL Construction
 Chubb Construction and Engineering Insurance
 HSB Construction Insurance
 QBE Construction Insurance
 Tokio Marine HCC Contractors All Risks
 Zurich Construction Insurance

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Frequently asked questions

Who should purchase construction insurance?

Anyone working on site should ensure they have sufficient construction insurance in place. Which covers you decide to purchase will depend on a number of factors including your responsibilities, contractual requirements, size and risk appetite.

  • Bricklayer
  • Builder
  • Carpenter
  • Carpet and flooring contractor
  • Demolition
  • Dry liner
  • Electrician 
  • Flooring contractor
  • Glazer 
  • Groundworker
  • Heating and ventilation contractor
  • Kitchen and bathroom fitter
  • Landscape gardener
  • Painters and decorator
  • Plasterer
  • Plumber
  • Project manager
  • Tiler

Do we need design and construct professional indemnity insurance?

The requirement to purchase professional indemnity insurance will be based on your responsibilities and contractual obligations. A design and build contract, describes a situation where the main contractor is appointed to design and construct the works. As opposed to a traditional construction contract, where the client appoints consultants to undertake the design and then a contractor to build the works. For example, as the main contractor that employs an architect you can be held vicariously liable for the work undertaken if there is an error with the design.

Construction professional indemnity claim examples include:

  • Mistakes in the preperation of the designs
  • Improper or negligent advice
  • Breach of building regulations
  • Selection of indequate materials

Construction professionals that usually purchase professional indemnity comprise of:

  • Architects
  • Building and industrial designers
  • Building inspectors
  • Construction management
  • Design and build contractors
  • Engineers
  • Environmental consultants
  • Geotechnical engineers
  • Interior designers
  • Surveyors
  • Structural engineers
  • Town planners
  • Project managers

What insurance should I get if my work involves multiple construction trades?

You should notify us if you undertake more than one trade, such as general construction and carpentry. We will be required to split your turnover by the percentage of time you would undertake for each business activity. That way, we’ll be able to provide you with construction coverage specifically designed to meet your needs.

What if we need a 'certificate of insurance'?

If you are required to provide evidence of your business insurance, ask us to provide you with a certificate of insurance. You should not provide a copy of your policy schedule and wording to your clients as this is a contractual agreement between yourself and the insurer and may prejudice claims under your policy if you assist an allegation made against your business. As a construction insurance broker, we can also respond to specific construction project or tender requests to detail how your coverage operates.

How much construction insurance do we need?

The amount of cover you require will depend upon your contractual obligations and appetite for risk. Liability claims that involving disability or death can be very expensive. Not to mention that awards made by the courts have increased to ensure compensation payments keep up with inflation and cost of living. Therefore, you may find that your level of construction insurance is not adequate. If you would like to discuss further, please give us a call.

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