- What insurance do builders need?
- Do I need builders’ insurance?
- Is builders’ insurance legally required?
- What does builders’ insurance include?
- Is everything covered in one policy?
- What are public and product liability insurance?
- Why do you need public liability insurance?
- What about product liability insurance?
If you’re in the construction industry and trying to arrange your insurance, you may be wondering what builders’ insurance covers. It's a broad term, so understanding what it includes and what you need is crucial.
Builders in the construction industry need to consider various types of insurance to protect their business from different risks. The most common types of insurance are:
- Employers’ liability insurance
- Public liability insurance
- Professional indemnity insurance
- Tools and equipment insurance
These are often collectively referred to as ‘business insurance’ or ‘builders’ insurance’.
If you work in the construction industry you will need to consider which builder’s insurances your business requires. There are different types, and understanding your specific needs is essential.
While 'builders insurance' itself isn't a single policy, having the right combination of covers is vital for protecting your business and livelihood.
While you are legally required to have certain types of insurance like employers’ liability insurance if you employ staff, public liability insurance and professional indemnity insurance are not legal requirements.
However, don't assume this means they are optional. Many organisations in the construction industry will not enter into a contract with you unless you have public liability insurance, often with a minimum cover level (e.g., £5 million).
Trade associations and public sector bodies may also mandate insurance as a condition of membership or contracts.
Consider whether you could afford to pay a substantial claim yourself. Accidents happen even with the best planning. Without insurance, your business and personal finances could be severely at risk if a claim is successful against you.
Builders’ insurance is a general term used to describe several types of insurance products relevant to those in the construction industry. What it includes can vary slightly from one insurance company to another, so always check the specifics of any policy.
In general, builders’ insurance can include:
· Public and product liability
· Employers’ liability
· Professional indemnity
· Insurance for tools and equipment
· Commercial vehicle insurance (van insurance)
This is not an exhaustive list, and you might need other covers depending on your specific business activities. If you think you may need additional insurance, discuss this with your insurer.
It’s important to check exactly what is included when comparing policies or reviewing a quote. Not every policy includes the same types or levels of cover.
Builders’ insurance is often made up of a combination of different policies tailored to your needs, rather than a single all-encompassing policy. If you are unsure about what insurance you need, always talk to your insurance company for clarification.
Public liability insurance is designed to protect your business if something your business does (or fails to do) causes injury to a member of the public or damages their property.
The types of incidents covered can range from minor to serious, for example:
· Minor incidents like splashing paint on a vehicle near your site.
· Serious accidents causing injury, illness, or even death to a third party.
Financial protection
Claims from the public can be substantial, potentially including lost earnings for the injured party, hospital expenses, legal fees, and damages. These costs can quickly escalate, reaching hundreds of thousands of pounds.
Public liability insurance covers these costs up to your policy limit, protecting your business finances.
Contractual requirement
Many clients, especially larger companies, will require you to have public liability insurance with specific minimum cover levels (often £5 million to £10 million) before they will contract with you.
Trade body requirements
Professional trades organisations and some public sector bodies may also insist that you have public liability insurance as part of their membership terms or contract conditions.
Product liability insurance is similar to public liability insurance, but it relates to damage or injury caused by a product you supply or install. For example, if faulty materials you installed cause damage after project completion, product liability would be relevant.
This is designed to protect your business if a current or former employee is found to have suffered illness or injury as a result of working for you.
Why you need employers’ liability insurance
- Legal obligation: You are legally required to have at least £5 million in cover if you employ anyone. This includes part-time staff, trainees, apprentices, and in some cases, even sub-contractors.
- Financial protection: If an employee makes a claim due to work-related injury or illness, employers’ liability insurance covers the compensation and legal costs, which can be significant.
- Avoid fines: You can be fined heavily for every day that you don’t have employers’ liability insurance when you are legally required to have it.
You need employers’ liability insurance as soon as you become an employer. The definition of ‘employee’ can be broad and includes:
· full-time and part-time staff
· temporary staff
· apprentices and trainees
· some sub-contractors (depending on the nature of your relationship and control over their work – always clarify with your insurer if you use subcontractors).
If you are in any doubt about whether you need employers’ liability insurance, it is essential to check with your insurer.
This type of insurance covers you if you provide professional advice or services which turn out to be negligent, wrong, or inadequate, resulting in a financial loss for your client or customer.
The advice provided could be about a range of things, including designs, specifications, calculations, project management, or other professional services you offer.
Why you need professional indemnity insurance
· Financial protection from claims: If a client suffers a financial loss due to your professional negligence or errors in your advice, they may make a claim against you. Professional indemnity insurance covers the compensation and legal costs associated with defending and settling such claims.
· Client requirements: While not a legal requirement, some clients, particularly in larger projects or more complex work, may require you to have professional indemnity insurance to protect their interests.
It’s not a legal requirement to have professional indemnity insurance, but it is an important consideration if you offer professional services or advice as part of your building business.
This is not a legal requirement, but it can be an important consideration for your business.
Why you need tools insurance
· Protect your livelihood: Tools insurance ensures that if your tools are stolen or damaged, they can be replaced quickly, allowing you to get back to work and maintain your income.
· Financial burden of replacement: Replacing tools, especially if you have a comprehensive kit, can be very expensive. Insurance removes this financial burden.
· Peace of mind: Knowing your tools are insured provides peace of mind and allows you to focus on your work without constantly worrying about potential loss or damage.
· Situational security: Good tools insurance policies often provide 24-hour protection, covering your tools even when they are stored overnight or in your vehicle (subject to policy terms).
The type of business structure you operate – whether as a limited company, a partnership, or self-employed – doesn’t fundamentally change the types of insurance cover you will need. The core insurance needs remain the same.
The main difference business structure might make is potentially in the cost of your insurance premium. For example, your premium will likely be higher if you employ others compared to working on your own, regardless of your business structure.
However, the fundamental types of insurance you should consider – public liability, employers’ liability (if applicable), professional indemnity (if applicable), and tools insurance – will be relevant regardless of how your business is set up.
The level of insurance cover you need will vary based on several factors:
· Insurer requirements: Insurers offer different levels of coverage, and the available options can vary between providers.
· Type of work: The specific nature of your building work and the risks associated with it will influence the appropriate cover level. Higher-risk activities might warrant higher coverage.
· Client requirements: Clients or contracts may stipulate minimum levels of public liability and professional indemnity cover you must hold.
· Trade body requirements: Membership of trade associations may also come with mandated minimum cover levels.
Typical cover levels
· Employers’ liability insurance: If legally required, the typical cover provided is £10 million.
· Public liability and product liability insurance: Cover levels commonly range from £1 million to £10 million. The ‘right’ level depends on your risk assessment and client/contractual demands.
· Professional indemnity insurance: Cover can start from around £100,000, but the appropriate level depends significantly on the type of professional advice you give and the potential financial impact of errors.
· Tools insurance: Policies often offer cover between £1,000 and £15,000, depending on your needs and the value of your tools.
It’s always recommended to discuss your specific circumstances with your insurance provider to determine the most appropriate and sufficient levels of cover for your builders’ insurance needs.
You should choose an insurance company experienced in dealing with builders and the construction industry. They will understand the specific risks you face and be able to advise you precisely and provide a quote for the cover you need.
Look for insurers who specialise in tradesman insurance or business insurance for the construction sector.