Builders Insurance

Protect Your Construction Company With Builders Insurance

Construction can be a high-risk industry, and giving coverage to your business and your workers is vital. You might be doing routine maintenance, extending a property, or building a new building from the ground up. Still, there are many unforeseen challenges that your construction business can face and builders insurance is your only protection.

Construction is one of the largest industries in the UK, with over 6% contribution towards the employment sector in the UK. Suppose your business activities cause accidental damage to someone’s property or life or maybe your employee/s and machinery face damage or injury. In that case, the right coverage can save your business from huge financial loss. With plenty of risks within this industry, it is imperative to have business insurance for your construction company. Without builders’ insurance, you will be handling these costs out of your pocket, which is not ideal for your business.

What Is Builders’ Insurance?

Builders insurance is a type of business insurance customised to companies and individuals working within the construction industry. Self-employed builders may also be covered under self-employed insurance.

There is a diverse variety of insurance policies that cover a variety of situations, from an injured labourer to a customer taking legal action against you. Securing your construction business with an insurance policy is legally required within the UK.

Why Do I Need Builders’ Insurance?

Whether you are a small business or a large construction conglomerate, getting insurance is a prerequisite within the UK and a legal requirement. Your businesses faces risk every day without an insurance policy.

• 78% of tradespeople have found out that their tools were stolen from job sites. An insurance policy with good coverage will ensure that you can make claims against any tool theft.
• Materials like bricks and mortar are also prone to theft as well as damage from rain and fires. Builders’ insurance can include all of these materials that you need for the job.
• If a customer takes action against you due to any errors, professional indemnity insurance can cover such legal claims.
• Builders insurance policy can offer a lump sum amount as coverage in case of any accidental injury or death.

What Does Builders’ Insurance Cover?

Keeping in mind that what builders’ insurance covers depends on the insurance provider company’s policy, let’s look at the probable coverages it provides. Any policy changes or limitations need to be periodically reviewed for updated information. A standard policy has restrictions on coverage which you might need to discuss with your insurance broker beforehand.

Not all policies cover all kinds of work under their insurance. You need to have a complete overview of policy limitations concerning:

• Scope
• Location
• Types of works
• Construction timelines
• Maximum project values

Project-Specific Or Annual Coverage

Project-specific coverage is not an ideal choice. It might save you some cash but a liability claim can happen at any time and annual coverage is the only way to protect yourself against heavy payments. Annual builder’s insurance is also more economical than the bills you will rack up through project-specific insurance costs.

Accidental Physical Injury

Often known as third-party bodily injury, this insurance is a must-have for all builders, in case you or your employees injure someone, from or out of your staff or business.

This includes:

• Accidents that happen directly because of engaging in construction work like building a wall.
• Non-intentional, or indirect accidents, like hitting a rough corner or receiving an electric shock at your site.
• Typically everything, from your faculty, to work and equipment, that could lead to a physical injury for the third party, is included here.

Business Interruption Insurance

This is especially a helpful cover for sole traders and self-employed business owners. It covers any costs or loss of income that might occur when you or your business cannot operate. Such a situation can arise from an injury, an illness, or other issue out of your control. For example, in case of a natural disaster, business interruption insurance will help you cover any loss or damage to your property or stock.

Employers’ Liability

If the business operations are causing damage to the health of your staff, it becomes an employer’s liability and could very well be claimed.

For instance, the usage of lead paint or asbestos in construction materials can lead to respiratory disorders like asthma, lung cancer, asbestosis, etc. Employees can claim medical expenses and replacement money for their inability to continue working if they prove to be the cause of their respiratory disorders being developed because of unsafe work conditions. Typical coverage involves:

• Health issues caused by working for the construction company.
• Medical expenses for the injury.
• Legal expenses to claim being suffered because of employer’s work and be compensated for.

Tools

If your employees use personal tools that get damaged, lost, or stolen, it is better to have that covered. (Because chances are, if they are using personal tools instead of company-provided ones, the company cannot afford to pay for them.)

This could involve:

• On-site theft of tools.
• Damage because of the nature of work.
• On-site loss, even if it happens because of a natural disaster, like water damage to tools because of heavy rainfall.

Stock and Business Equipment

Stock is the construction material a builder is responsible for, like cement, bricks, limestone, etc. Other business equipment like laptops, PCs, and office furniture, are also part of any business to keep the operations running. Having them insured saves you from any monetary damage due to:

• Theft
• Damage
• Loss

Hired-In V/S Personal Equipment

Heavy machinery, like excavators and cranes, is often outsourced or hired for building work when a company does not own them personally. These are called hired-in plant machinery. Insuring them is as important as insuring your equipment as it protects you from any cost imposed by accidental damage, on-site theft, or loss of the machinery.

Contract Works

Anything that damages your under-construction building can be paid for if insured properly. For instance, a fire breaks in the middle of a project, damaging half the property under construction. Such instances are called contract works and can vary from damage by a flood or fire to property vandalism.

Because of the complexity of contract works, here’s an attempt to communicate the risks covered in the building contractors’ insurance:

• The repair cost of the damage caused on and by the property under construction.
• Cost of repair for human and material resources, like staff, tools, etc.
• Compensation or coverage for natural disasters and criminal offences like theft, robbery, and vandalism

Legal Expense

Every business requires a legal team every once in a while to cover internal or external disputes. These expenses could take a toll on a business like construction with risky business operations. Therefore, insurance for legal expense coverage is recommended annually to be prepared in case of;

• Tax disputes
• Employee injury claims
• Claims from people being indirectly affected by your business operations.

…and so on.

Professional Indemnity Insurance

This is a rather tricky one that could cost you a fortune on legal expenditures. As a licensed builder, your advice in the construction industry holds value. However, if a client, following your advice, loses money and claims the loss from you, having professional indemnity insurance could cover the legal cost of defence.

Products vs. Public Liability

Public liability covers builders’ insurance claims that occur during construction and product liability covers claims of damage or injury that occur after completion of a project.

Liability Towards Subcontractors

You should choose a policy that covers any liabilities towards subcontractors or their workers. Some contracts may require you to take builders’ public liability insurance for your subs to avoid large future expenses. It is best to include this clause within your insurance policy without any thought.

Inclusion Of Contract Principals

Proprietors or owners should be automatically included in your insurance policy as they are also a part of a building contract.

Underlying Contractual Obligations

Public liability insurance is not just limited to the principals or owners, but should also include all contractual agreements. These include labour hires, sheet piling agreements and any arrangements made with any training organisations. Failure can lead to unforeseen large-scale claims against your company which might leave you unprotected and broke.

Vibration Damage

During construction, vibration due to site work can cause damage to adjoining buildings. Most standard builders’ insurance policies don’t cover this minor detail, but you should beware of such policies. Choose a policy that would even offer coverage for conjoining buildings’ dilapidation as well as offer a report that evaluates the conditions beforehand.

Machinery Items On-Site

Any machinery like hoists, cranes, or mobile plants also need to be covered under your insurance policy.

Design Works

If your company is doing design works in return for a fee, public liability insurance might not be enough to cover any damages. Professional indemnity (explained earlier) cover will be required in most cases.

Off-Site Operations

Your policy coverage must cover any liabilities that can occur from sales, storage, workshop, or other property and sites owned by your business. These risks need to be dealt with under a complete and flexible insurance policy.

It’s important to remember here that you will find no standard insurance for builders that covers everything. However, you have the option for amendment or extension of the preset policy by many insurance companies.

Being fully informed about your business operations is important to acquiring builders’ insurance because you know your business best. To avoid the misfortune of an expensive liability, ensure that the right business insurance is always covering you.

What Is Not Covered Under Builders’ Insurance?

1. Intentional Damage and Negligence: Any damage caused to any property or equipment intentionally is not covered by any insurance company.
2. Drugs and Influence: If the event in question occurred by an individual/s under the influence of drugs or alcohol, then the insurance company will not insure the damage.
3. Wear and Tear: Builders’ insurance doesn’t cover any claims that occur due to wear and tear of equipment due to poor maintenance or non-renewability of resources.
4. Breach of Contract: Any liability claims that happen due to a breach of the said contract will also not be covered.
5. Improper Use of Business Vehicles: If the vehicles under your company’s name were misused or mismanaged, the insurance company is not bound to cover such claims under builders’ insurance.

Why Do I Need Builders’ Public Liability Insurance?

Public liability insurance for builders covers you against any damage or injury that is caused due to business operations on-site while a project is going on. This could have occurred on a building site or a residential property. This is not a legal requirement but many clients would like you to have one before they sign a contract with you.

To simplify the concept, let’s take this example first:

At your unfinished construction site, one of the walls falls to the ground damaging cars parked on the other side in a parking lot. Those cars belong to members of the public residing in a residential area nearby. Technically, they can sue you for the expenses incurred which makes you legally liable to pay unless you have builders’ public liability insurance that can save you from such expenses.

How Much Does Builders’ Insurance Cost?

Builders insurance costs can be different for different companies depending upon several factors like:

• The coverage you require.
• The type and size of your business.
• You turn over.
• The scope of your project.
• Your location.
• The coverage you opt for optionally, like any tools or equipment, or if you want to acquire third-party coverage. That can affect your builders’ insurance costs significantly.

How To Develop A Risk Management Plan?

• Identify the risks: Construction companies face risks that may be environmental, project-based, safety-based, or even legal. Identifying these risks beforehand is an essential first step towards a risk management plan.
• Calculate risk probability: Once you have identified the risks, calculate the probability and scale of the impact of each risk on your business. Prioritise your risks and manage the high-priority risks first.
• Strategize your responses: It is time to strategize your response to the risks. If a risk will cost your business its operations, perhaps it is better to avoid it. Whereas, some projects have low-priority risks, which might be avoided with a contingency plan in place.
• A risk management plan: This document contains all assessments, strategies, evaluations, and responsibilities of each team member. Have contingencies in place which you should revise periodically with a risk analyst. Communicate any changes with your company to ensure effective communication application of the plan.

Keep A Regular Policy Review Cycle

You might be a small construction business owner right now with appropriate coverage, but soon you will turn into a construction conglomerate and at that time, a policy review and renewal will be adamant.

Whether you are starting a new project or buying new equipment, regular policy reviews will ensure everything is covered by your builders’ insurance. You can look over your coverage and ensure that it is still adequate according to your operations. Insurance companies keep changing their exclusions and limitations and your company needs to be up to speed with those.

Many companies work with insurance agents to ensure that there are no coverage gaps in their policies. This helps in keeping the business protected against potential liability claims.

The Claims Process: Step-By-Step Guide

In the case of an incident that leads to a public liability claim, acting efficiently and promptly is crucial to file a claim diligently and for a beneficial outcome.

Safety First:

Ensure the safety of all parties involved in the case of a workplace accident. You will need to inform all concerned parties (contractor, subcontractors, third parties, owner, etc.) immediately regarding the occurrence.

Document Everything:

Your next and most crucial step is to jot down all details of the incident thoroughly. You need to gather photographs of the incident site, collect statements from present witnesses, and make diligent records of every aspect of the incident that is possible. This is the holy grail of a claim and it will help you in filing a successful insurance claim.

Notify Your Insurance Provider:

You will need to notify your insurance provider as soon as possible about the damage. They will promptly guide you during the complete claim filing process. This process will also include any further investigations into the incident and a thorough review of the coverage within your policy.

It is important to learn about builders’ insurance and the risks involved as a construction company owner/manager. It is not just a facade to fulfil legal requirements, rather it protects your business against all kinds of financial risks.

Proactive risk mitigation, use of technology, continuous monitoring and review, and regulatory compliance with safety standards are the only ways forward when dealing with builders’ risk and construction risk management. However, in the case of workplace accidents and damage, builders’ public liability insurance is a key component of managing risks within the construction business. Builders’ insurance will not only stabilise your business financially but also maintain your company’s reputation in the construction arena.

How Can I Get Cheaper Builders’ Insurance?

Never skimp out on builders’ insurance because in case of a claim you can face huge financial costs and losses. Instead, there are many ways to get the best and cheapest rates on your insurance plan.

• Increase the excesses: The excess is what you automatically pay when you need to make a claim. A rule of thumb is that the higher the excess is, the lower your premium will be. It is best to consult with a broker who can give you the best value deal with the lowest premiums on your insurance policy.
• Pay Annually: Paying annually in one go can lower the cost than when you have to make monthly payments. If you can afford one yearly payment, this would save up on insurance costs significantly.
• Stay Claim Free: Nobody knows what the future holds but a rigorous approach towards health and safety within your business operations is an efficient way to stay claim-free. For example, you can set a safety manual in place for employees and contractors to follow on the job site.
• Specialized Builders’ Insurance: You should only book brokers and insurance companies that specialize in the construction business. This will reduce the monthly premiums you have to pay. So don’t be afraid to ask the tough questions and to shop around for the most suitable insurance policy for your business needs.
• Hire An Independent Broker: It is easy to fall into insurance traps and say yes to a high first quote. Instead, hire an independent insurance broker to make this deal for you. A knowledgeable broker can take control of any negotiations with the insurance team when you cannot.
• Self-insure Your Tools: When you self-insure your tools, you keep your money in your pocket instead of paying hefty premiums that might not offer complete coverage for your tools and equipment.
• Combining Policies: Not all policies are a one-for-all solution. While shopping for a policy, compare prices and various policies’ coverages. Then, you can always make the best choice which might be more than one policy to get the most coverage and the highest value deal.

Frequently Asked Questions

How can I assess my coverage needs?

As there is never a one-size-fits-all answer to this question, you have to consider several factors to check what coverage you require for your business. These factors include:

• Size and nature of your projects: Large projects carry more risks and need more coverage. In high-risk activities like demolition, additional coverage will be required.
• Your business’ financial situation: What is the amount you can afford in case of a claim? The more coverage you choose, the less you will have to pay if a claim occurs.
• Contractual requirements to consider: Your clients or subcontractors might have additional contractual requirements regarding insurance. It is best to include them in builders’ insurance coverage as well to avoid future losses.

My builders’ public liability insurance covers how much cost?

Public liability insurance covers the cost of legal expenses and damages for claims that your business causes, like a physical injury or damage to the property of another. The level of coverage required will vary with the type of business, degree of contact with the public, and the project size that the business is undertaking.

Standard maximum liabilities can go up to a couple of million dollars in public liability insurance. It’s wise to analyse your business exposures to establish the right insurance standard.

Can you give me any tips to reduce my premium amount?

Yes, here are some helpful tips that can help you in reducing your premium amount while choosing an insurance policy:

• Implementing Safety Measures

If your construction company openly displays a commitment to safety, your insurance company might use that to reduce your premium amount. For example, if you are offering regular safety training and frequent checkups of your safety regulations, your insurance policy is bound to give you better premium rates on these grounds.

• Having A Clean Liability History

If your company has a history of zero or no claims, this could significantly lower your premium amount. Risk management is an important aspect of a business and having a risk analyst on board might just save you from large liability claims.

• Have A Seasoned Broker

A specialised broker in construction insurance will be able to get you the best premium price for the highest amount of coverage.

Despite unpopular opinions, underinsurance is not the way to secure low premium costs. You should be completely covered for any mishap or damage and you will save greatly towards premium and other claim amounts always.

What information should I consider when I get builders’ insurance?

Here’s a probable list of information that is required to purchase builder’s risk insurance:

• Nature of project – new construction or restoration.
• Total construction budget and value.
• Geographical location.
• Start and end dates.
• Contractors involved in the project.

The insurer needs to evaluate the risk and come up with the policy conditions to be taken and discuss them with the service provider for any omissions or additions before purchasing a policy.

Does builders’ insurance cover poor workmanship?

Builders’ insurance policies, whether general or public liability, do not provide cover for poor workmanship. These insurance policies only provide cover against likely mishaps or work-related injuries on a builder’s property or persons undertaking the work, not against the quality of the work done. However, if the substandard work leads to an unrelated third-party damage or injury, it could be covered under insurance by discussing policy amends with the insurance company.

For example, a builder uses poor construction material on the roof of a new building. A month later, roof leakage occurs during heavy rainfall. Here, the builder’s insurance will not cover the cost of redoing the roof. But if the water damages the floor or other associated construction, it can be covered depending on whether terms of consequential damage are added or not.

Can builders’ public liability insurance cover my workshop?

Yes! Builders’ public liability insurance is intended to provide coverage for liability for death or bodily injury or damage to third-party property caused by your business operations. This usually includes accidents occurring both at the worksite and your business location, such as a workshop.

Therefore, your public liability insurance should cover the costs of legal action and compensation if anyone, for example, a client, delivery driver, or a passer-by, is injured or has their property damaged on your business premises because of your operations. However, it is necessary to mention that public liability insurance does not cover your property or your employees.

What is builders’ risk insurance?

Let’s say you are working on building a sky-scrapper and the unfinished framework falls as a result of strong winds, or a tornado. How would it be justified for you to pay the cost/liability of a natural disaster?

Builders’ risk insurance provides coverage for such unpredictable instances by covering the cost of any accidental damage to the project under process. It could be the building under construction, a wooden frame because of a halted project, a pipeline, fences, and other temporary or unfinished installations at the construction site.

In summary, it provides cost coverage to the property which is “under construction” or “remodelling”.

Is building contractor insurance important for me to have?

You are a third party involved in a contract with a construction company or perhaps working with them as a subcontractor. You also need coverage to protect yourself against heavy claims. Public liability insurance for contractors and subcontractors is an essential part of the agreement.

This may include plumbers’ insurance or electricians’ insurance among other contractors hired by your company.

Do I need to insure my business van?

You definitely should insure any car or motor vehicle that you use for your business. It is important to secure motor fleet insurance to secure the motor vehicles working under your business operations.

If you have more than one vehicle operational within your construction business, you should look into fleet insurance to get good insurance rates on multi-vehicle insurance.

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