What Insurance Do Builders Need?
All builders should be fully insured, and it is important to not only ask them what kind of insurance(s) they have, but also to see a copy of it.
When considering what insurance do builders need, the first question is what kind of work is the builder going to be doing for you, and will you be covered if anything goes wrong.
1. Homeowners Insurance
No matter what type of buildings insurance you may have in place, there will be a time while the builder is working on your project, that this insurance will not cover you. It is essential that the builder is appropriately insured to cover this risk until the buildings insurance will again cover the entirety of your home.
There are three main types of insurance that every domestic builder should have:
Public Liability Insurance
This insurance protects against injuries to third parties. As long as the builder has done everything possible to mitigate risk then the insurance covers the builder (and you, if you are found liable) against this liability. For example, if a slate tile blows off from an unfinished roof in high winds and smashes a neighbour’s car.
Employer’s Liability Insurance
This type of insurance is a legal requirement for builders that are limited companies. The insurance covers any employee that becomes injured while working on your property. If you select a sole trader (non-limited) who uses employees, ensure that they have cover in place to protect you from litigation in the event of employee injury.
Installer’s All-Risk Cover
This insurance covers the builder’s work in the event it is accidentally destroyed before the buildings insurance is extended to cover it (which only happens after the work has been completed).
Over 30% of builders do not bother with this insurance as the risk is considered so low, by why take the risk at all?
What if an uninsured lorry backs into your extension? What if an unlicensed skip lorry drops a fully laden skip into your new kitchen? Make sure your builder has this insurance for complete peace of mind.
- If your builder uses sub-contractors, make sure they are covered by the insurance
- Ask to see the insurance and all-risks certificate
- Check for membership of Trade associations such as FENSA or CPA
- Ensure that the company are on the house insurer’s recommended list of installers
- An insurance backed guarantee (IBG) or warranty protects both the homeowner in case the building company goes out of business. You can read more about Warranties HERE.
2. Commercial Building Design and Construction
Commercial insurance is a huge area, and it is very expensive to over-insure and easy to under-insure. Expert guidance is highly advisable.
Here are some of the kinds of commercial insurance:
A legally binding agreement which extends the duty of care and the liabilities placed on both parties. This is ancillary to the original contractual agreement.
Contract Works Insurance
A contractors all-risks insurance policy issued under the names of the contractor and client. It covers all the risks associated with the construction project.
Directors and Officers Insurance
Protects Company Directors and Officers against claims by shareholders or creditors against alleged wrongdoing, especially if a company is liquidated.
This type of insurance protects Company Directors and Officers from a claim by shareholders, or creditors of a company in the event that a claim is made in respect of their alleged wrongdoing. All Company Officers owe a fiduciary duty to their company and, in addition the concept of “Wrongful Trading” is particularly hazardous if a company goes into administration, or is liquidated.
Public Liability Insurance
Generally required by contractors to insure against injury, or death to third-parties (members of the public and sub-contractors)
Employers’ Liability Insurance
All firms who employ staff are required by law to have Employers’ Liability Insurance (EL), which will pay compensation to an employee if they are injured at work.
Due to poor investment in flood defences, climate change, the use of non-porous tarmac, and companies building on flood plains with poor run-off, flood insurance has become more important, more expensive and harder to get.
Latent Defects Insurance
Covers new buildings and renovations and refurbishments of existing buildings if defects become apparent during, or after the building work has been completed.
Integrated Project Insurance
IPI covers everyone involved in the project right along the supply chain and replaces liability-driven professional indemnity insurance which requires proof of fault.
Legal Expenses Insurance
In a world where legal action is becoming more and more common, insurance against the cost of any legal action is now much more widespread.
Legal Indemnity Insurance
Provides recompense against the loss of earning, or expenses if the policyholder has to deal a range of unforeseen legal issues (e.g. rights of way), or additional planning requirements.
Combined Commercial Buildings and Contents Insurance
Provides cover against damage, fire and theft, and flood and loss of rent receivable. It also covers salaries and other overheads.
Insures a client against the risk of a contractor failing to fulfil their legally binding contractual obligations. This is most commonly doe to construction companies going into administration.
Professional Indemnity Insurance
PI covers proven negligence on the part of the service provider and covers both the service provider and compensation for the client to pay for the effects of the negligence to be put right.