Construction Insurance
Understanding Construction Insurance: What Trades Need to Know
Construction Industry Insurance | What Coverage Do We 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.
A construction insurance policy typically includes various coverages such as public liability, employers' liability, and contract works insurance to protect against financial losses arising from property damage and legal liabilities. Public liability insurance is usually the most important cover and protects construction companies from compensation claims arising from injury or property damage to third parties.
Whilst professional indemnity (PI) insurance is essential to offer protection for design and build contractors to guard aginst claims of negligence, errors, or omissions in the services or project management. It's important to acknoweldge you can be held responsible for the work of subcontractors (i.e. achitects and engineers) you appoint, even if they have their own insurance.
Property developers and trades persons should ensure they have adequate construction insurance to cover risks associated with property damage and liability claims. Speak to a specialist construction insurance broker about your needs.
Do we need a commercial construction insurance?
Construction all risk insurance 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. The construction insurance is typically purchased by the principal owner and builder to protect against property damage to the structure being built.
The contract works cover will reinstate or repair the building works resulting from any damage or destruction. It's important to note a builidng contractor can be potentially liable for damage of the works in process up until the project has been completed and handed to principal owner.
Own plant insurance and hired-in plant insurance can provide valuable protection to construction equipment and machinery from damage or theft. Typically, these additional property covers can be added to a construction insurance policy.
What does construction insurance cover?
A construction insurance policy 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.
Contractors all risk
Contractors all risk insurance is a flexible property and liability policy starting at £468 annually that provide a number of covers under one product.
Public liability
A public liability claim will usually occur when someone is injured, or property is damaged because those responsible have failed to ensure its safety.
Professional indemnity
To protect design and build contractors, or the main contractors whom have vicarious liability exposure for appointing design contractors.
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Compare construction insurance and save up to 25% on your annual premiumWhat are the different types of construction insurance?
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 arising from a claim for 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 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 insurance
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
Where your building firm provides design, technical, specification or project management services it is recommend you purchase professional indemnity insurance. 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
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.
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.
Directors and Officers Insurance
Directors and board members should consider their personal liabilities when making decisions on behalf of the company and arrange coverage.
Motor Fleet Insurance
Company fleet insurance is a cost-effective means of managing your car and van insurance for multiple vehicles under one policy.
Excess Liability
Excess layer insurance will typically be arranged to provide additional cover for public liability, and potentially employers liability.
Get construction coverage tailored to your needs. Talk to one of our construction insurance brokers
Quotes from the wholesale market can start at £468 annually or £39 a monthLeading insurers for construction companies
We work with the leading construction insurers who can accommodate a wide range of projects. 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.
Insurance for construction companies is complex and without the guidance of a specialist, you may find your business uninsured when you need to rely on your construction policy.
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. Note 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.
Why is business insurance in the construction industry important?
Construction sites are prone to accidents and injuries, therefore construction insurance plays an important role to mitigate risk. Construction projects typically involve significant investment and therefore those interests need to be protected in the event of financial losses arising from property damage and legal liabilities.
Whith mulitple parties typically involved, there may be different responsibilities and insurable interests to consider. 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.
Construction firms with comprehensive insurance cover promotes professionalism and risk awareness. Having appropriate cover 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.
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