Do I Need Higher Levels Of Builders’ Insurance For A Large Contract?

So you’ve landed a big contract – congratulations! But does this mean you need to increase your builder’s insurance to cover the extra responsibility?

Absolutely. When you take on a larger project, you’ll need more insurance to cover it. Specifically, you will need contractors’ all risks (CAR) insurance. Talk to us to arrange a policy that’s suitable for you.

Ensuring that you have the right level of cover means that the project will go smoothly, with fewer risks to anyone involved.

In this article, we’ll go over the following:

• What is contractors’ all risks insurance?
• Why do I need all risks insurance?
• Do I need to increase my indemnity?

As always, if you’re not sure what you need from your insurance policy, talk to our experts – they’ll be happy to help.

What is contractors’ all risks insurance?

Contractors’ all risk insurance protects against physical damage to works and site materials that you were contracted to undertake – and is pretty much essential when you undertake a large building project.

This kind of cover protects building works while they are in progress. Contract works insurance or contractors’ all risks (CAR) insurance – not to be confused with “car insurance”, just to make things more complicated! – protects you and your business if the project is flooded or destroyed by fire during its construction. Not only that, it also covers damage to materials and equipment, including hired-in equipment.

For example, if a contractor causes damage to a large-scale renovation in progress, their standard public liability insurance would not provide full coverage for everything. Having a contractors’ all risk policy in place would fill the gaps and help pay to rectify the damage.

Say you have been hired to build an extension and it burns down before you hand it back to the owner, but no one suffered injury because it was empty. Public liability would not cover the disaster, but the cost of the build so far will come back to you thanks to your contractors’ all risks policy.

Why do I need all risks insurance?

You need this kind of insurance for larger projects because the risk level is higher. The bigger the project you take on, the longer you’ll be working, and the more tools and materials you’ll need. The value of the project is much higher – so you’ll want to protect your client’s investment as much as possible during the course of construction.

It is also likely that you will be hiring in large, expensive, and therefore theft-attractive equipment to complete the contract. All of your equipment and materials will be covered under your CAR policy, whether that’s your own plant, or any plant that you hire for the job and for which you are responsible.

Building materials and tools can be expensive, so it makes sense to ensure they have good coverage in place. For example, making sure you add products liability cover means you’ll be compensated in the event of a claim relating to parts and materials you install. Bought a faulty pack of ceramic wall tiles? This is the policy you need if the tiles arrive damaged or the wrong colour, and the job suffers a delay as a result.

In the majority of cases, the insurance provider you have your policy with will pursue the manufacturers. As long as the part turns out to be defective, it wasn’t your own fault and you installed the materials correctly, the manufacturer will be liable.

Do I need to increase my indemnity?

In essence, if something goes wrong during construction, the insurance will pay out to the hurt party instead of the policyholder. Many contractors wrongly assume this cover will come under their professional indemnity policy – but this is not the case. Professional indemnity only provides cover if you have been negligent in design, advice or specification of work: in other words, it protects what you say, not what you do.

When you take on a large project, you may well want to increase your limits of indemnity on your public liability section.

An indemnity to principal requirement protects what’s known as the “principal” – who is usually the end customer – or else the principal contractor. It does this by outlining that if a claim is paid, the beneficiary of the policy will not necessarily be the policyholder but instead the third party who has suffered the damage or injury.

Confused about the builders’ insurance you need for your business? Give us a call today, and our experts can help sort out what you need.