If you are in the process of having a home built or are having any improvements done, then it is likely that you have engaged the services of a professional building contractor. As the work being performed can often have many potential risks, it may leave you wondering about the type of insurance your builder should have.
It’s a common question that makes good sense to ask, especially as you can benefit if the work performed isn’t up to scratch or damages caused to your property during construction. Most reputable companies will ensure that they are adequately protected from all eventualities and will have construction insurance cover in place that protects a wide range of disasters like bodily injury, property damage, and more.
At a bare minimum, protection should be in place to shield the business from employee claims related to personal injury or illness and any injuries or damage to third-party persons or property. But most homeowners will also want their builder to have protection for tools and equipment, and an ‘All Risks’ policy can help ensure the builder has the widest set of insurance coverages.
All risks insurance
Businesses that are involved in the construction trade can purchase special insurance policies to provide themselves and their clients with the protection needed. These policies are known as ‘Construction Insurance’ or more typically as ‘All Risks Insurance’. This type of insurance protects the many areas of risk connected with construction. All risks insurance is a combination of several insurances grouped under one single policy.
Policies that can be included under all risks insurance can be things like:
- Employers Liability
- Public Liability
- Product Liability
- Personal Accident
- Tools and Plant
- Professional Indemnity
- Goods in Transit
- Business Vehicle
While each policy is tailored to the individual company’s needs, public and employer liability insurance are typically included as standard. Any coverage that is not needed can often be eliminated from the policy. For example, companies that don’t require coverage for moving goods or products from site to site would not require goods in transit insurance. Additional policies can be included depending on the nature of the construction performed. Highly specialised construction companies may add coverage for things like bacterial or fungal exposure to ensure protection from claims associated with the added risk.
The cost of public liability insurance can vary greatly based on the company size. A sole trader or small business will pay relatively reasonable premiums while the price will increase for larger businesses. Companies with 6 people see a jump in their premiums based on the higher risk, and businesses with 11 people or more will have even greater premium payments.
Builders public liability insurance
While not a legal requirement, any building company that comes into contact with members of the public will need to have public liability insurance, building sites and construction carry a much bigger risk of injury or accidents than other types of business, and exposure to liability can be high. Falls and slips can occur with regularity, and injuries or damage to persons or property caused by falling objects are commonly seen.
In the event of any accidents, having a public liability policy in place means that the company is protected from paying out financial settlements, medical bills, and other expenses associated with successful claims leveraged against them. It prevents the business owners from having to pay money out of pocket and limits personal liability.
Public liability policies can range in coverage levels to accommodate all sizes of companies. Small businesses that are not involved in high-risk, complex construction may require a smaller policy with limits of liability of £1 or £2 million. Larger businesses that have demanding responsibilities like building high-rise towers may require a policy that provides coverage of £10 million or above.
Does insurance cover construction defects?
While all risks insurance covers many eventualities, it may not always extend to issues that occur due to poor materials or workmanship. While professional indemnity covers things like customer dissatisfaction due to miscommunication or other errors, construction defects do not fall under this insurance.
For defective design and issues arising from associated complications, it can be a tricky subject. All risks insurance will cover practical damage to works in the process right up until completion. The majority of all risk or construction insurance policies have an exclusion that speaks to materials and workmanship to limit liability, paying only for damage to works caused by the defect. Once building works are completed, the cover provided by All Risks insurance ceases, and the responsibility passes to the home or building owner.
To be fully covered in this instance, the builder will need to have Latent Defects Insurance. This additional policy will cover faults in building design or construction that appear years after completion. Coverage of this type can be arranged for commercial and residential, or mixed-use developments. The advantage of this type of insurance is that it does not require proof of negligence, meaning that the claims process is expedited.