Building Contractors Insurance
Building Contractors Insurance – What you need to know before you buy
If you work in the construction industry as a contractor, no matter whether you are managing a large Limited Company working across various sites in the UK or running a small specialist contracting business locally, it is vital to have the right insurance in place. There are a bewildering array of considerations. Speaking with an Insurance Broker like Ellis David cam help make sense of it all. This article is a guide to the basic considerations you may need to make but, if you have a specific Building Contractor Insurance requirement, its always best to speak to us.
Why not give our commercial team a call on 020 7354 3881 or send a message?
Why is Insurance necessary for the Construction Industry?
The construction industry was accountable for 32% of fatal injuries at work in 2014. While some contractors may consider insurance as a ‘necessary evil’, others know that a good insurance policy can be the cornerstone of your business. Some Contractors might view insurance as a promise to provide compensation for something which may never happen. In the construction industry accidents can and do happen regularly – some can be fatal. The need for adequate cover is abundantly clear.
Insurance should be seen as essential in order for your business to continue operations. Very few companies within the building trade have sufficient capital to recover from an incident without insurance and this is the number one reason why small businesses cease to trade after an accident occurs. Whilst having an Insurance policy won’t reduce the risks that your company faces, it can reduce the financial burden should the worst happen. Any contractor working without adequate insurance is putting the success of the entire company at risk.
Essential Insurance for Building Contractors:
Employers’ liability – It is a requirement by UK law that if anyone is in your employment, even sub-contractors, that you have a minimum of £5 million worth of EL Insurance. This will protect you should any of your employees have an accident, or worse as a direct result of working for you. This can also include cover should anyone fall ill as a consequence of working for you. A sustained illness because of work is 30% higher within construction than any other industry. Where as a general EL policy will suit many businesses, most policies will exclude activities that are essential everyday jobs in construction like working with heat or electricals and this should be taken into account.
Public liability – With rising house prices, many people are choosing to extend their current homes or renovate old ones. Restoration on buildings can be a minefield for accidents with contractors working on buildings in poor repair before the renovation even starts. Poor lighting (if any at all), water ingress, rotten timbers, and falling masonry are all potential accidents with the most common injury on a construction site being falling when working from a height. These claims could come from anyone on site ranging from building inspectors to vandals, homeowners or neighbours.
CAR (Contractors All Risks) cover – This insurance will cover the property from what it is to at the start of the project to what it will be at the end. Make sure that your sum insured is adequate for the building at the end result as most CAR policies carry an inner limit for project costs. Ensure that the costs of all contracts and repair works are covered too with room for maneuver. Leave yourself 25 per cent over and above your largest contract.
Hired-in plant cover – It is a requirement of the Construction Plant-hire Association (CPA) that you must pay the replacement value of any plant and equipment that you are hiring. You will also be liable for hiring out the equipment whilst it is being repaired or replaced. Make sure that only correctly trained staff use hired-in plant. The HSE reported in 2014 that inadequate training was the cause of death for over 7% of total fatalities within construction.
What other types of Insurance might I need?
Motor Insurance or Fleet Cover – Company cars, vans, lorries and licensed plant are required by the Road Traffic Acts to be insured for third party liability both for injury and damage. This is to stop the ever growing population of ‘grey drivers’ that use their personal car for work and are (often unknowingly) inadequately insured. You should also have cover for your vehicles to be left on site if needs be, as well as covering any contents you may store in them like tools, workwear and building supplies. If you have 2 or more vehicles, you may find that insuring them as a fleet may be a more cost effective option.
Personal Accident (Working Principals, Partners & Directors) – It is not uncommon for many business to rely heavily on the capabilities and skills of one or two people. In their absence, turnover of work and subsequently, overall income may be reduced. Insurance can cover the permanent loss of a key man or woman should they have an accident leaving them unable to work ever again. Temporary disability insurance can also be arranged to provide a weekly payment to enable suitable short-term replacement to be obtained.
Tools & Equipment All Risks – This policy covers the contractors plant ranging from heavy, immobile equipment to hand tools on a tool belt. Valuable equipment is by definition costly to replace but often massively underestimated. Your tools are the backbone of your business, often being accrued over years of work. If they were to be lost, stolen or even damaged in a fire, you wouldn’t be able to continue working. Would you be able to buy all new equipment and return to work the next day to finish the contract?
Do I need Professional Indemnity Insurance?
Professional indemnity Insurance is essential to provide cover for any errors or mistakes in the work that you are contracted to do. It does not provide cover for defective workmanship or contractor’s supervision.
For design-and-build contractors, professional indemnity cover is required in addition to policies such as Public Liability and Contractor’s All Risk but is just as essential. For example, if you find a fault in the underfloor heating system you’ve laid after pouring down concrete flooring, you are liable to pay for the repairs on it. Similarly, if you give out construction advice in a professional capacity but this has had adverse effects on the clients wealth or well being, you could be liable for this.
A key aspect of all PI Insurance is that they are written on a ‘claims made’ basis meaning that you are only covered for work done during the time you’ve had the policy. You can however take out retroactive insurance which will cover you for work already done before taking out the policy.
What if I use Subcontractors?
There is an important distinction between using contractors and subcontractors – and it will have an impact on your Employers Liability Insurance requirement, so its very important to get it right.
Contractors provide pre – agreed services and are hired by the client for a set fee under a contract for services. Contractors can charge the client fees by the hour, day or on a lump-sum basis with their contracts often specifying indicators for part payment. Contractors will need the correct insurance cover in place, including EL cover for any subcontractors they may use, even if the sub contractor has their own policy in place.
Subcontractors have a contract from the contractor, to which they are accountable. Subcontractors can be anything from an individual self-employed person to a large national organisation but ultimately carry out work that the contractor cannot do, like plumbing, or wiring for example. A subcontractor has a contract with the contractor for the services provided and an employee of the contractor cannot also be a subcontractor. Even if your subcontractor comes from a large organisation, they are still considered under your employment will need to be covered within your EL policy. Subcontractors should however have full insurance for their own vehicles, tools and belongings and you should ask to see proof of this insurance before arranging to work with them.
How Can I Reduce my Exposure to Risks on a Building Site?
Once you are aware of the risks that you face as a contractor, you can work to minimise them. This may help reduce your insurance premiums.
Heat warranty conditions – Check your subcontractors’ policies for warranty conditions with regards to the use of naked flames or machinery such as blow-lamps, heat guns and even space-heating equipment. If their use is not excluded in your policy, warranty conditions will usually apply. This often makes it the responsibility of the policyholder to cover any inflammable materials prior to work starting, have fire extinguishers on site and regularly check on recently completed work to make sure if is not still burning or smouldering. You should never leave a site for the evening if there is still a risk of a fire starting.
Height warranty conditions – With falling when working at heights being the most common cause for fatalities, the HSE is becoming more strict with their rules around working with heights. Check the maximum height that your policy will allow you to work at and ensure that your equipment such as ladders is in full working order.
Naive or inexperienced clients – Many clients are unaware that they may need to purchase additional insurance for the duration of the work taking place. Many also deem insurance too expensive and will close their eyes in the hope that their existing arrangements will be enough. Make sure that they have adequate insurance in place before agreeing to start work and ask to see proof of this.
Adjoining properties – If the property you’re working on shares elements of structure such as the dividing wall in a terrace but is under different ownership, you must ensure that you have cover for accidental damage to the adjoining premises. Also, don’t make the assumption that the next door is in good condition: it should be surveyed with is condition recorded before work starts. If necessary, extra work should be carried out to ensure the safety of both your staff and the building owners.
Site security – Building sites can spark the curiosity of passers by, as well as being seen as a potential to make money for groups of organised crime. When leaving the site unattended, you should consider:
- boarding up or sealing ground-floor windows and doors, and any first-floor window with easy access via a flat-roof or trellis
- water, gas and electricity should be suspended and turned off at the mains
- having appropriate hazard signs in visible places
- securing plant that could cause damage or injury such as power tools or heavy objects.
When taking out your Contractors Insurance, it is essential that you work with a Broker that understand the perils that working on a construction site has and can provide you with Insurance that adequately reflects this.
Ellis David has over 150 years of combined Insurance Broking experience with a specialism in the construction industry. Our team can tailor a policy to suit the exact needs of your business rather than a one size fits all policy that can leave you open to risks. For a no obligation discussion, call us on 020 7354 3881 or send a message.