While every construction insurance policy is different, there are a few things you can expect to see in a standard policy. Many companies prefer to consolidate all their coverage into an ‘all risks’ construction policy. These are great for convenience, as you’ll know who to contact in the event of needing to make a claim, and all risks insurers are often happy to offer discounts when you take out a larger all risks policy.
Keep in mind that every construction business is different, with some preferring to take out individual policies from insurers instead of an all risks policy. This can be great for choice, and remember shopping around will help you land a better price.
Here are some of the insurances you might see in a construction insurance policy in the UK:
- Public Liability insurance: Covers claims made by impacted third parties (general public, other businesses, etc.) if they’ve sustained injury or property damage as a result of your work.
- Employers’ Liability insurance: A legal requirement for any business in the UK that hires staff (full-time, part-time, contract, apprentice, etc.); will protect you if a worker has become injured or unwell while on the job and sues your business.
- Professional Indemnity insurance: If a client feels you’ve been ‘professionally negligent’, such as providing bad advice/service or not meeting the agreed standards of the project.
- Tools and Equipment insurance: As the name suggests, insures your tools if their stolen, damaged in a covered event, or accidentally lost.
- Personal Accident insurance: Especially important given the risks staff can face in the construction industry, financial cover if you/your staff are unable to work due to injury or illness.
- Business Use Vehicle insurance: Covers your vehicles to support your business, such as driving to client sites.
- Product Liability insurance: Often sold with public liability, insures if a product you’ve supplied causes damages, whether during or after project completion.
An all risks policy might include some or all of these coverages – they’re always tailored to your business, so you’ll only pay for coverage you need.
How much insurance do I need for my construction business?
The amount of insurance your construction business takes out should depend on the value of the projects you work on. Smaller businesses, working on projects such as home renovations and extensions, might consider £1M-£2M of liability coverage sufficient, but if you’re working on larger-scale projects (new builds, office buildings) then you might want more. Keep in mind that many customers will specify you hold a minimum amount of coverage, so check with your clients what they’re expecting if you’re unsure.
For employers’ liability, the law states you must have at least £5M of cover (insurers won’t sell you less) – it isn’t worth risking working without a policy if you do have staff, as the penalties are severe, up to £2,500 per day for each day you operate without a valid cover.
For tools and equipment cover, you’ll want to take stock of the value of the items you want to be covered and base your insurance level on that. It isn’t compulsory (and clients are unlikely to insist you hold a policy) but consider the potential impact if some of your tools, especially more expensive ones, were stolen, lost, or damaged.
Your business use vehicle insurance will depend on many of the same factors as your regular social, domestic & pleasure insurance. Things such as your age/driving experience, vehicle engine size/power, and whether or not you want to add any additional drivers will all increase or decrease your cost accordingly.
How much does construction liability insurance cost?
In the UK market, £2M worth of public liability starts from around £105 annually for a small construction business. £5M costs only slightly more, coming in around £140 per year. While opting for a smaller coverage limit can help save money, it isn’t worth the risk, especially for larger construction companies exposed to more potential hazards.
Does homeowners insurance cover construction?
When a homeowner undertakes a project on their home, such as building a loft conversion or installing a new kitchen, the level of risk the property might create for your insurer can increase. As such, it’s important to inform your insurer before undertaking any work to allow them to re-evaluate the property and adjust your policy accordingly. Failure to do so risks your insurer refusing to cover you if something does go wrong, either during construction or after work is finished, so it’s well worth checking ahead of time.
Your insurer will want to know a few things about the work before coming to a decision. These will include things like the cost of the project and its duration, the business you’re using for renovations (and their insurance details), and whether or not you’ll be in the property while work is being completed. Once they’ve assessed the situation, they’ll come to one of three conclusions:
- The work won’t change the risk level of your home, so your policy doesn’t need adjusting
- The work will change the risk level of your home, so your policy needs adjusting, which may result in additional cost
- Your insurer feels the work being undertaken increases the risk level so much that they won’t cover the renovation
If your insurer won’t cover the work being done then you’ll need a specialist form of renovation insurance to protect your property while work is being completed. Remember also that your construction company should cover any damages to your home or property that they’re at fault for, which is why it’s important to pick a firm with excellent and reputable insurance coverages.