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What our Nerds say about builders' insurance

A building site, be it for a commercial property or within a residential home, is full of hazards. Not only for you as a builder, but for any clients or members of the public who might be nearby.

If something were to go wrong, the cost of a claim made against you or your business can be intimidating. That’s why it is important to consider taking out a builders’ insurance policy. It will cover the legal fees and compensation costs if a worst-case scenario were to arise.

What is builders’ insurance?

You don’t have to be a risk assessment officer to know that even the best run building site is full of potential dangers. From trip hazards to heavy machinery, there are many opportunities for injury or property damage to occur. And if you as a builder are found responsible, it can prove to be costly.

Builders’ insurance, which is an umbrella term to describe a wide range of insurance policies can help cover those costs, not only if an employee or client gets hurt, but also if your tools are damaged or stolen, or if work on your building site is disrupted. It may also make your clients feel more comfortable about working with you if they know you have the proper protection.

Professional indemnity insurance for builders

One of the types of cover you may consider is professional indemnity insurance for builders. This form of insurance is designed for times when a client might accuse you of negligent services or bad advice, which has caused them a financial loss. It would deal with the compensation costs and legal fees related to any claim made against you.

» COMPARE: Professional indemnity insurance

Builders’ public liability insurance

Another important policy is builders’ public liability insurance. If you have clients, visitors or members of the general public near your building site, they run the risk of injury. Meanwhile, their property can also easily be damaged, especially if you are working in someone’s home.

Public liability insurance would cover the compensation costs and legal fees if either injury, illness or property damage were caused by your work.

» COMPARE: Public liability insurance

Other types of builders’ insurance

It is not just clients and members of the public who would be protected by your builders’ insurance policy.

Own tools and equipment insurance would cover replacing the tools and equipment you own in the event they were stolen, lost or accidentally damaged. Hired-in plant tools and equipment insurance would do the same for any items you have hired or rented to complete your business activities.

If your worksite was damaged or destroyed during the building process, contract works cover would pay for replacing the materials and work lost, helping you get the project back to where it was before the disruption occurred.

Personal accident insurance, meanwhile, could compensate for loss of income if you were permanently disabled, or killed, as a result of an accident.

Other types of builders’ insurance

It is not just clients and members of the public who would be protected by your builders’ insurance policy.

Own tools and equipment insurance would cover replacing the tools and equipment you own in the event they were stolen, lost or accidentally damaged. Hired-in plant tools and equipment insurance would do the same for any items you have hired or rented to complete your business activities.

If your worksite was damaged or destroyed during the building process, contract works cover would pay for replacing the materials and work lost, helping you get the project back to where it was before the disruption occurred.

Personal accident insurance, meanwhile, could compensate for loss of income if you were permanently disabled, or killed, as a result of an accident.

Do I need builders’ insurance?

If you employ one person or more, and they are not a member of your family or are based abroad, you are legally required to take out an employers’ liability insurance policy worth at least £5 million from an authorised insurer. This is to cover costs and legal fees related to any injury or illness that your employees might suffer while carrying out their work.

» COMPARE: Employers’ liability insurance

Other than employers’ liability insurance, you are not legally required to take out any other forms of business insurance. However, given the risks associated with building work, it can be worth considering purchasing a comprehensive builders’ insurance package. This is because there are a number of common circumstances where you may be relieved to have cover.

For example, a member of the public is hit by some falling debris from your building site, and they decide to make a claim against your business. If you had builders’ public liability insurance, it would cover the compensation costs and legal fees incurred by that claim.

Public liability insurance would also kick in if, while working on your client’s new conservatory, you accidentally broke their television carrying tools through the house.

As a builder, there will be times when you are asked to advise a client on the best course of action. Say you recommend that a wall doesn’t need plastering. If your client then has problems with their interiors due to the lack of plaster, you could be held responsible. It is for these kinds of situations – including providing plans for extensions and rebuilds – that you would want to be covered by professional indemnity insurance.

When hiring equipment, the cost can be significant – even more so if one of your employees accidentally breaks the excavator that you have just rented. But if you had hired-in-plant equipment insurance, your cover would pay for the excavator to be replaced or repaired.

Or, let’s say there is a break-in at your building site and your toolbox is stolen. As long as the proper security measures were in place at the time of the break-in, your own plant equipment insurance would pay for your tools to be replaced.

One of the worst-case scenarios imaginable as a builder is if a flood destroys the progress and materials at an incomplete worksite, leaving you liable for the cost. Contract works insurance, however, would cover the losses and damages in order for you to get the site back to the state it was in prior to the flood.

What does builders' insurance cover?

Below we detail at a glance what policies are typically found under the umbrella of builders’ insurance, as well as what you need to know about what isn’t usually included.

What is usually included in builders’ insurance?

Depending on the needs of your individual business, comprehensive builders’ insurance package will normally contain the following policies:

  • professional indemnity insurance
  • public liability insurance
  • employers’ liability insurance
  • own plant tools and equipment insurance
  • hired-in-plant tools and equipment insurance
  • contract works insurance (also known as contract all risk insurance)
  • personal accident insurance

Other policies to consider could include van insurance, cyber insurance and stocks and materials insurance.

Many of these policies would also apply to those working in other trades, such as plumbers and electricians.

» COMPARE: Tradesman insurance

What is usually not included in builders’ insurance?

What is not included in your builders’ insurance policy is, to a certain extent, determined by what you decide to pay for.

For example, if you chose not to opt for hired-in plant equipment insurance, and you then damaged the heavy machinery you had rented, your insurance would not pay for the repairs.

When it comes to tools and equipment, general wear and tear, or mechanical or electrical breakdown will not usually be included. Your tools and equipment insurance also may not automatically include items such as work laptops and smartphones.

Meanwhile, for a claim related to theft to be successful, you would need to prove that the proper security measures had been followed, including locked doors, windows and gates.

How much does builders’ insurance cost?

There are a range of factors that will affect how much your builders’ insurance premium costs. These include, but are not limited to:

  • how many policies you choose to take out
  • the level of coverage you want from each policy
  • how many employees you have
  • where your business is located
  • the types of buildings work you carry out
  • how many years of experience you have as a builder

How to choose the best builders’ insurance package

If you own a small construction business, your insurance needs will differ to a builder who works on their own. You should therefore make sure that you weigh up not only the risks of the building industry when considering your insurance package, but the specific requirements of your business as well.

Then you can use the builders’ insurance comparison tool to help find the right deal for your business.

» COMPARE: Builders’ insurance

Builders’ Insurance FAQs

What kind of insurance do builders need?

Unless you are an employer – employers’ liability insurance is mandatory in the UK – there are no legal requirements when it comes to builders’ insurance. However, you business may be better protected, and your clients may feel more comfortable working with you, if you have:

  • professional indemnity insurance
  • public liability insurance
  • contract works insurance
  • own plant and hired-in-plant equipment insurance

To work out what level of builders’ insurance you need, you should try to think about all the specific risks associated with your business.

What does a builder’s insurance cover?

When you take out builders’ insurance, you could be covered for the compensation costs and legal fees related to a number of different work-related scenarios, including injury, illness and property damage.

Which situations are covered will depend on the policies included in your builders’ insurance package.

What insurance does a self-employed builder need?

If you are employed by a builders’ firm, you would likely be covered by its company insurance. You should make sure to check this with your employer.

However, if you are a self-employed builder, it is your responsibility to source your own insurance. You would need to take into consideration the types of work you carry out, as this will inform the policies you purchase. These may include:

  • employers’ liability insurance (if you employ anyone else)
  • professional indemnity insurance
  • public liability insurance
  • contract works insurance
  • own plant and hired-in-plant equipment insurance

Who is responsible for builder’s risk insurance?

Builder’s risk insurance, also known as contract works insurance or contractor’s all risk insurance, can be taken out both by the property owner and the contractor working on the site. Whose responsibility this is will depend on the terms of the contract.

What is the difference between builder’s risk insurance and course of construction insurance?

There is no difference between builder’s risk insurance and course of construction insurance – they are different terms for the same type of insurance. It can also be known as contract works insurance.

This policy is designed to pay the repair and materials costs related to any building work in progress that is interrupted or delayed through an event such as a flood, vandalism or theft.

About the author

Connor Campbell
Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more
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