What Does Construction Insurance Cover? A Guide for Contractors and Construction Businesses
You may already have a construction insurance package in place, but do you know exactly what it protects?
Construction insurance can cover a range of risks, from someone being injured because of your work to damage to a project before it’s finished. It can also protect your employees, tools and plant, and risks linked to design or professional advice. However, construction insurance isn’t one standard policy where everything is automatically included. The cover you need depends on how your business operates, the work you carry out and the risks you face.
So, what does construction insurance cover, and how do you know whether your current insurance reflects the risks your business faces?
What does construction insurance cover?
Construction insurance is made up of different policies, chosen around the risks your business faces.
A self employed tradesperson will need very different protection from a construction company with employees, subcontractors and several projects running at once. The projects you work on and the responsibilities you take on can also affect the cover you need.
Depending on your business, construction insurance can include:
- Public Liability insurance
- Employers’ Liability insurance
- Contract Works or Contractors All Risks insurance
- Tools and plant insurance
- Motor Fleet Insurance
- Professional Indemnity insurance
You may not need every type of cover on this list, and other insurance could be relevant depending on your business. The important thing is understanding the risks you face and making sure your insurance reflects them.
Does construction insurance include Public Liability?
Public Liability Insurance is an important part of a construction insurance package for many contractors and construction businesses.
Think about the places you work and the people around you. You, or a member of your staff, could accidentally damage something at a client’s property, or a member of the public could suffer an injury because of your work. Public Liability insurance can protect your business against claims that arise from situations like these. This can include legal costs and compensation, subject to the terms of your policy.
Public Liability isn’t generally a legal requirement in the UK. However, a client, main contractor or contract may require you to have it before you start work. Therefore, having the policy is only part of the picture. You also need to make sure the cover and limits you have meet the requirements of the work you’re taking on.
Does construction insurance cover work in progress?
A project doesn’t have to be finished before something goes wrong. You could be several weeks into a job when fire, flooding or another event damages work you’ve already completed. There may also be materials on site waiting to become part of the finished project.
Contractors All Risks insurance can protect work in progress against insured loss or damage while a project is underway. Depending on the policy, materials intended to form part of the project can also be covered.
Who needs to arrange this insurance isn’t always straightforward. Your construction contract may set out who is responsible for insuring the work, so check this before the project begins rather than assuming someone else has arranged it.
Does construction insurance cover your employees?
For employers in the UK, having at least £5 million of Employer’s Liability Insurance is a legal requirement.
Employers’ liability insurance helps your business meet compensation costs if an employee is injured or ill because of the work they do for you. For employers in the UK, having at least £5 million of Employers’ Liability insurance is a legal requirement.
Think about who actually works for your business. You may have permanent employees, bring in additional people when projects get busy or regularly work with subcontractors.
Those working relationships matter when arranging your insurance. Calling someone self employed doesn’t always tell you everything you need to know about your responsibilities, particularly if they work under your direction and control.
That’s why it’s important to explain to your broker who works for you and how those arrangements work in practice.
Are tools and plant covered by construction insurance?
You shouldn’t assume your tools and plant are automatically protected because you have other construction insurance in place. It’s important to check that you have Tools and Plant Insurance cover in place and understand any conditions that apply.
Think about the equipment you use from one project to the next. You might own your everyday tools but hire larger pieces of plant when you need them. The cover you need can differ depending on what belongs to you and what you’ve hired.
If you hire plant, you should also check what you’ve agreed to be responsible for while it’s in your possession. Your broker can then make sure your insurance takes those responsibilities into account.
Where and how you store equipment can matter too. If you regularly keep tools in your vehicle, our guide to tools insurance and theft from vans explains what to check in more detail.
Does construction insurance cover driving for work?
Driving can be a big part of working in construction. You and your employees likely travel to sites, between sites, visit suppliers or use vans to carry tools and materials.
If you use cars or vans for your construction business, a fleet policy can bring your vehicles together under one policy. Fleet insurance can work for businesses of different sizes, whether you have one or two vehicles or manage a much larger fleet. Your cover should reflect the vehicles you use, who drives them and how you use them for work.
Employees may also use their own cars for work. For example, they could drive from the office to a construction site or travel between sites during the working day. These vehicles are often referred to as the grey fleet.
Although the employee owns the vehicle, employers still have a responsibility to manage work related road risks. The HSE advises employers to make sure privately owned vehicles used for work are safe. Employers should also check that driving licences, insurance and MOTs are legal and up to date.
Driving from home to a usual place of work is generally ordinary commuting. However, travelling between construction sites or to somewhere that isn’t an employee’s usual workplace can be different. Employees therefore need the appropriate insurance for the journeys they make.
Remember, vehicle insurance and tools insurance protect different things. Insuring your van for business use doesn’t necessarily mean the tools inside it are covered if they’re stolen.
Does construction insurance cover design work and professional advice?
Construction isn’t always limited to carrying out physical work.
You may also take responsibility for design, specifications or professional advice as part of a project. If an error or omission in that work causes a client to suffer a financial loss, this is where Professional Indemnity Insurance is relevant.
For example, you might agree to take responsibility for part of a project’s design as well as carrying out the work. If there’s a problem with that design and the client suffers a financial loss, they could make a claim against your business.
Not every construction business will have the same professional risks. What matters is understanding the responsibilities you’re accepting, particularly when you take on design and build work.
Your contract may also require Professional Indemnity insurance, so check the requirements before agreeing to the work.
Does construction insurance cover subcontractors?
Using subcontractors can make your insurance arrangements more complicated, because there isn’t one answer that applies to every working relationship.
You may use someone who works alongside your team under your direction, or bring in an independent subcontractor to complete a specialist part of a project. Those arrangements aren’t necessarily treated in the same way for insurance purposes.
There can be an important distinction between labour only and bona fide subcontractors. A bona fide subcontractor will typically operate independently, providing their own labour and tools and arranging their own insurance. A labour only subcontractor, on the other hand, may work under your direction and control.
This means you shouldn’t assume a subcontractor is automatically covered by your insurance or that their own policy takes care of everything.
Tell your broker about the subcontractors you use, what work they carry out and how they work with your business. You should also check what your contract says about insurance before the project starts.
Can your construction contract affect your insurance cover?
Yes. The work you carry out isn’t the only thing that can affect the insurance you need.
A construction contract may set out who needs to insure the work and what cover each party must have in place. This could include requirements for Public Liability, Contractors All Risks or Professional Indemnity insurance.
For example, you might already have Public Liability insurance, but a new contract could require a higher level of cover than you currently hold. Another project may place responsibility for insuring the work in progress with a particular party.
This is why it’s worth checking the insurance requirements before you sign a contract and start work.
Is construction insurance a legal requirement?
Not every type of construction insurance is required by law.
If you employ people, Employers’ Liability insurance is compulsory according to the UK Government Employers Liability Insurance guide, with some exceptions outlined. All employers in the UK need at least £5 million of cover, although there are some exemptions.
Other types of construction insurance, such as Public Liability and Contract Works, aren’t generally legal requirements. However, a client, main contractor or construction contract may still require you to have them before work begins.
That distinction is important. A policy doesn’t have to be required by law for you to need it to carry out a particular project.
Does your construction insurance cover what you need?
There isn’t one construction insurance package that will be right for every contractor or construction business.
Think about your latest project. Who worked for you? What tools and plant did you use? Were you responsible for any design work? Who was responsible for the work in progress? Did your contract set any insurance requirements?
Your answers may change from one project to another, which is why it’s worth reviewing your insurance as the work you take on changes.
At Robison & Co, we take the time to understand how your construction business works, the projects you take on and the risks you need to protect against. We can help you arrange cover that reflects your business, rather than assuming the same construction insurance will work for everyone.
If you’d like to talk through your construction insurance, or get a quote, please contact us on 01730 265500 or email hello@robison.co.uk.