Builder's insurance explained
What are the different types of builder's insurance? And which policies are mandatory? Here's what you need to know
Key takeaways
Builders typically require various types of insurance such as Public Liability, Employers' Liability, and Professional Indemnity to protect against legal, financial, and operational risks
Insurance for builders isn't just essential for compliance with legal requirements. It also provides financial security and peace of mind in the event of accidents and potential lawsuits
The cost of builder's insurance varies depending on the size of the project, risk level, and claims history
You can usually keep your premiums low by opting for higher excess and maintaining a good safety record
What insurance should a builder have?
Here are the key types of insurance every builder should consider. Each policy addresses specific risks associated with building projects:
Public liability insurance: This covers legal action costs and compensation claims that can be made by third parties for injuries or damage caused by the builder's work. For example, if a passer-by is injured by tripping over building materials, public liability insurance would cover the compensation costs
Employers’ liability insurance: This is mandatory if you employ staff and protects against claims from employees who might be injured or become ill due to their work. For instance, if an employee falls from scaffolding and is injured, employer's liability cover helps manage the financial risks
Contract works insurance: Also known as 'construction insurance' or 'construction all risk insurance', this covers the project itself - including cover for materials and works-in-progress against risks like fire, flood, theft, and vandalism
Professional indemnity insurance: For builders who provide design or advice, professional liability insurance covers claims made for professional negligence, as well as claims for losses due to errors or omissions in the provided advice or services. It is vital if a design flaw causes structural issues
Tools and equipment insurance: Protects against the theft, loss, or damage of tools and machinery crucial for construction work. You can typically get tools insurance worth up to £20,000 from MoneySuperMarket
Personal accident insurance: Vital if the builder is self-employed. It provides a financial safety net in case of serious injury or illness that prevents them from working
Do builders need insurance?
Insurance is essential for builders to maintain compliance and credibility within their industry and is often mandated by law. Many regulations require builders to have specific insurance types to operate legally.
Builder's insurance safeguards workers, their operations, and their clients. For clients, comprehensive builder's insurance provides trust and reassurance and can be a key factor in their decision-making.
Without proper insurance, builders face significant financial and legal risks. These include hefty fines, legal costs, and even bankruptcy in the event of large claims.
How much does insurance for builders cost?
Factors that determine the cost of builder's insurance include the scale of the projects, the builder's claims history, and specific risks associated with their work.
For instance, a builder involved in high-rise construction might face higher premiums. This is due to the increased risk compared to a residential home builder.
The average cost range for different types of builder's insurance can vary significantly. Public liability insurance might cost anywhere from a few hundred to several thousand pounds annually.
Premiums for professional indemnity and employer's liability insurance are similarly variable.
If you're looking to keep costs down, you may want to opt for a higher excess.
Demonstrating a strong track record of safety and risk management can help, while regular training and maintaining a clean claims history are effective ways to keep insurance costs in check too.
Why do builders need insurance?
Protection and compliance
Builders require insurance primarily for protection and compliance. Insurance shields claims relating to accidents and injuries on sites that are bustling with activity and potential hazards.
If an accident occurs, insurance covers medical expenses and legal fees. This coverage is crucial for worker safety and the financial stability of the business.
Legal and contractual obligations
Builder's Insurance ensures builders meet the necessary standards and regulations required by law. Without proper insurance, builders risk hefty fines, legal action, or even a halt in operations.
Financial security and peace of mind
Having the right cover in place means builders can concentrate on their projects without the constant worry of large claims that could cripple a business
How do I know if my builder has insurance?
Before starting any construction project, it's vital that you confirm that your builder has valid insurance. Here's how to check your builder's insurance status effectively:
Ask your builder for proof of insurance: A reputable builder will readily provide the necessary documents. These should include a current and valid insurance certificate. Ensure you receive a copy, either physical or digital, to review
Verify the validity of the insurance documents: Check the dates to ensure the policy is active during your project. Additionally, confirm the insurer's details by contacting them directly if possible. This step helps avoid any discrepancies and confirms the insurance coverage's authenticity
Look for specific details. Check their cover includes public liability and professional indemnity coverage. These are crucial for protection against property damage and faulty workmanship. You should also ensure the coverage amount is sufficient for your project's full scope
