What Types of Building Insurance Should Your Contractor Have?
Before starting a building project, it’s good practice to speak with your chosen contractor about the types of insurance they hold. It’s worth knowing what they’re covered for and what insurance policies you might need to purchase to give you peace of mind throughout the build and beyond.
In this article, Emma Whyatt, Director of Federation of Master Builders Insurance Services explains the types of cover your builder should have and which policies you should consider yourself.
What are the essential insurance policies a main contractor should have?
It depends on the individual contractor, but in most cases the policies which are typically required are:
– Public Liability
– Employers’ Liability
– Contract Works (also known as Contractors All Risks)
– Professional Indemnity (if the builder is giving any advice)
– And of course, for any commercial vehicles
What is Public Liability insurance?
Public Liability Insurance is a policy that your builder should hold to cover damage to third-party property or third-party individuals. Examples could include drilling through a wall and hitting a water pipe which then causes water damage to your home, or leaving tools out, which you or a family member then trips over causing an injury. Having this cover in place means that you will be compensated. Public Liability Insurance is a requirement for all Federation of Master Builders (FMB) members.
What is Employers’ Liability insurance?
Employers’ Liability Insurance covers your builder if the people working for them suffer an injury or illness or die as a result of the work they undertake for the company. This can be something that happens on site like a fall from height, or it could be an issue that emerges over a longer period – for example, through long term exposure to vibration.
Builders should carefully consider who they need to cover under their Employers’ Liability policy – it’s not just full-time manual employees. It should also cover some subcontractors, casual workers and work experience, for example.
What does Contract Works Insurance cover?
Contract Works Insurance (also known as Contractors All Risks) is cover that’s taken out by builders which is designed to protect building works in progress, for loss or damage that happens during construction (such as fire, flood, theft, vandalism). It’s similar to a home insurance policy in the risks it covers – but it’s specifically for the new works, rather than the existing home. Contract Works can also provide cover for damage to plant machinery and equipment, third party property damage, tools and personal effects, or building materials that are kept on site.
Should a self-builder consider purchasing Self-Build Insurance or Site Insurance?
Self-Build Insurance consists of multiple products designed to make sure you are covered for your self build, from the point at which you have bought your self-build plot, throughout the construction phase, through to completion. Cover may include Structural Warranties (which could be required if you need a mortgage) as well as Public Liability Insurance, Employers’ Liability Insurance and Contract Works.
Whether or not you need this cover will depend on your level of involvement in the project. FMB Insurance are happy to discuss your individual circumstances and provide further information on the policies that would suit your specific needs.
What other types of insurance should people think about purchasing when building?
Homeowners should consider purchasing a structural warranty to cover works such as extensions, renovations, conversions, and new build projects. It provides you with peace of mind that your property is covered should any defects appear with the 10-year period following completion and also may help you to secure finance or mortgage funding, as it’s often is a condition of mortgage companies for a structural warranty to be in place.
If you want to sell your home while it’s under 10 years old, the buyers mortgage provider will normally want to see proof that there is a latent defects policy on the property. Without this you could have difficulty selling.
What does a 10-year structural warranty cover?
A 10-year Structural Latent Defects Insurance generally applies to new build properties, and will most likely have been taken out by the builder prior to starting the building work. This (whilst not a legal requirement) is a condition of mortgage companies when lending funds for purchase of a new or newly converted property.
It provides coverage for insured defects and water ingress that may arise in a newly built, renovated or converted home. It covers the cost to repair or rebuild the structure and could also include other elements such as contamination of land, alternative accommodation, additional costs and fees, and removal of debris. Policies apply to the property, rather than the individual so if you choose to sell up, it can be transferred to any new owners of the property within the 10-year period.
What is your number one insurance tip for those having renovation work done to their homes?
Notify your home insurer that you’re having the work done and ask them if there is anything specific that needs to be in place. (Even more important if you’re vacating the property whilst works are being undertaken.) Ask for copies of the contractor’s insurances – check the expiration dates cover the time period you are having work done, or ask for proof of renewal should this happen whilst works are ongoing.
Consider taking out an Insurance Backed Guarantee (IBG) or Structural Warranty to provide cover in the event of defects in the work undertaken, and the contractor having ceased to trade.
What is an Insurance Backed Guarantee?
An Insurance Backed Guarantee is an insurance policy offered by many builders, which covers defective workmanship and/or defective materials, most commonly for a period of 10 years. This cover provides your client with additional peace of mind that in the event the company ceases to trade, they can still make a claim under the terms of the original guarantee.
What is your number one insurance tip for clients looking to build a home?
Insurance should not be an afterthought. Some insurance products may take longer to arrange than others due to the complexity of the cover and/or the nature of the project. Therefore, by planning ahead you will allow yourself plenty of time to gather quotes and avoid having to delay your project.
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