What Does Construction Insurance Cover?

Construction insurance is designed to protect businesses from the wide range of risks and hazards you might face on any given day in the construction industry. These can range from damaging someone else’s property to having your building site waterlogged in a flood. While not all construction insurance is mandatory, there are a few coverages that most good businesses wouldn’t step on-site without.


Read the in-depth guide to Construction insurance by NimbleFins if you have any further questions or would like more information.


Construction insurance coverage


A typical Construction insurance policy will cover your employees, tools/plant, third parties and work-in-progress in the event of an incident/accident. Your employees will be covered by Employers’ Liability, a legal requirement for any business hiring staff in the UK, irrespective of whether they’re full-time, part-time or contract.


Tools and equipment can be covered by Tools and Equipment or Plant insurance. Insurers will pay for you to replace anything lost, stolen or damaged in an event out of your control (fire, flood, etc.) allowing you to quickly resume work and reducing any negative impact on your customers. If you’ve hired any heavy machinery, then a Hired-in Plant policy will cover the cost of replacements for the business you’ve loaned from.


You’re protected by damages to third parties by Public Liability insurance. It’ll cover you if a customer, the general public or another business on-site incurs damages as a result of your operation. Public Liability isn’t a legal requirement, but you won’t be able to bid for most construction contracts without a policy, so you’ll definitely need one if you want to be able to tender for projects confidently.


Work-in-progress is insured by Contract Works. It insures the project you’re working on from damages out of your control, such as an unexpected flood forcing you to restart the groundwork. It’s designed to cover all aspects of the repair/replacement process, such as the labour you need to get things back on track and any replacement materials/tools required.


Types of Construction insurance


Every Construction insurance policy is different, but a good one might include a combination of the following:


  • Public Liability
  • Tools/Equipment/Plant
  • Movement of Machinery/Goods in Transit
  • Professional Indemnity
  • Employers’ Liability
  • Product Liability
  • Contract Works
  • Legal Expenses


You can often find a combination of these grouped together in a “Construction All-Risk” policy. All-Risk can be extremely useful, keeping all of your coverages under one provider, meaning you’ll always know who to contact in the event you need to make a claim. Insurers are often happy to offer discounts for larger policies too, so you might save compared to taking out individual policies from different providers, but keep in mind it is always worth shopping around to see where you can get the best deal for your business.


Keep in mind that every construction company is different, and what works for one company might make no sense for yours, so shop around and consider what’s best for your business.


How much does Construction insurance cost?


Research indicates that a basic self-employed Construction Public Liability policy starts from around £100 per year. This increases quite dramatically if you hire staff (as you’re required to take out Employers’ Liability) – £2M of Construction Public and Employers’ Liability for a 6 person company is likely to set you back around £1,750 per year. You can add £5,000 worth of Tools/Equipment cover for around £100 per employee. However, these are rough costs as each insurer uses a unique pricing model to calculate risk from the details of an application. This means you could pay more or less.


Giving estimates for policies such as Plant/Hired-in Plant, Professional Indemnity and Contract Works is more difficult. Quotes are likely to depend on a few factors, primarily your business’s size, your annual turnover and the value of your average contract. Contract Works is fairly unique, in that insurers will ask for the value of your largest project – so if the biggest contract you’re working on is worth £500,000 then you’ll need £500,000 worth of Contract Works.


How can I save money on Construction insurance?


Construction insurance can be expensive, and while it’s never a good idea to skip important coverages just to save a little money there are a few smart ways to avoid spending too much.


  • Tool storage: Research estimates that storing your tools in a secure lock-up overnight (and not in the back of a van) can save you up to 40% on your Tools cover.
  • Location: You’ll pay more to cover your business/projects if insurers consider them to be in “high risk” areas. These include city centres or the areas around harbours, airports and power stations.
  • Risk: Public Liability quotes will ask you for a few specifics about your business. Avoiding risks can help reduce your quotes’ value – for example, you’ll pay less if you don’t use explosives, work above 10 metres or below 1 metre and don’t work while suspended by cable/rope.
  • Shop around: As with any insurance policy, you shouldn’t just take the first deal you find. Have a look around the market, gather quotes from multiple sources and find the insurer you’re most comfortable with at the best price.

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