Insurance provides peace of mind that you’ll be protected if something goes wrong. This is especially important for builders, as working in the construction industry comes with a high level of risk.
But insurance is rarely a one-size-fits-all. Depending on the type of work you do, you’ll need to be covered for certain things. From public liability insurance to professional indemnity insurance, there are various types of cover you can get to suit your individual circumstances. But what does it all mean and what type of cover do you need?
Whether you’re a builder or a homeowner looking to get some home improvements done, you might be wondering about builders’ insurance and whether it’s required by law.
In this article, we’ll explain everything you need to know about builders’ insurance cover.
Is builders’ insurance required by law?
If you hire employees, you’re legally required to have employers’ liability insurance and if you use your vehicle for work, you’ll need to buy commercial vehicle insurance — but not all types of builders’ insurance are required by law.
However, it’s a good idea to assess your risks and tailor an insurance policy so that you’re covered for everything you need to be. Public liability insurance, for example, will cover your legal costs in case someone makes a claim against you.
Read on to find out more about the different types of builders’ insurance and what you’re legally required to have.
What type of builders’ insurance do I need?
As a builder, there are various types of insurance available to protect you, your client and other third parties.
Here are some insurance policies to consider:
Builders’ insurance required by law:
Employers’ liability insurance
As already mentioned, employers’ liability insurance is compulsory for businesses that hire all types of employees, including subcontractors.
This type of insurance protects all parties in the event that an employee is killed, injured or falls ill as a result of their work.
You’re legally required to be insured for at least £5 million, but most insurers offer upwards of £10 million.
Commercial vehicle insurance
If you use your vehicle for work, you’ll need to buy commercial vehicle insurance, or “business vehicle insurance”.
Most policies will include cover for your tools and equipment as standard, but check with your insurer or broker if you’re unsure.
Recommended builders’ insurance:
Public liability insurance
While public liability insurance isn’t a legal requirement, it’s one of the most important insurance policies a builder can have.
Some clients might even insist you have this type of cover, particularly local authorities, who usually ask you to be insured for a minimum of £5 million.
It’s there to cover your legal costs and any compensation payouts should a third party make a claim against you for injury or damage to their property as a result of your work.
As well as compensation payouts and legal costs, public liability insurance can cover repair and replacement costs and medical bills.
Professional indemnity insurance
You may have years of experience under your belt, but a client could still make a complaint about the work you’ve done for them.
That’s why it’s important to have professional indemnity insurance. It covers your legal costs and compensation if a client takes you to court because they believe you’ve provided inadequate advice or services.
This is a comprehensive policy that covers you if the work you carry out is accidentally destroyed by things like fire, flooding or extreme weather conditions.
It’s likely you won’t need this insurance, but having it will provide peace of mind that your sites and materials will be protected for every eventuality.
Optional builders’ insurance:
Building warranties and guarantees
You may want to provide your clients with a warranty to reassure them that your work has been completed to the standard set by your building warranty provider.
An insurance-backed building guarantee can also cover your client for the continuation of work with another builder if your company goes bankrupt.
Tool and equipment insurance
Not only are your tools essential to your work, but they can be expensive pieces of equipment, so it’s worth thinking about getting them insured.
If they were lost, damaged, or stolen, you could be faced with a hefty bill for repairs or replacements.
If you hire your tools or work outside the UK, speak to your broker or insurance company about adding this cover to your policy.
Personal accident and sickness insurance
If you’re off work because of illness or injury, the last thing you want to worry about is how you’re going to pay your bills.
With personal accident and sickness insurance, you’ll get a weekly payment, whether or not the accident that caused your illness or injury happened at work.
Contract works insurance
This type of insurance is common in large-scale or public sector projects.
It covers work on-site, including building materials, tools, and other equipment, for losses, damages, and theft.
What happens if I don’t have builders’ insurance?
If you employ staff but you don’t have employers’ liability insurance, you could face having to pay a hefty fine. Similarly, not having insurance for your commercial vehicle — or having the wrong type of vehicle insurance — could result in a penalty, as well as points on your licence.
With other types of builders’ insurance, like public liability insurance and professional indemnity insurance, you won’t face fines for not having them. However, you may be landed with extortionate legal bills and compensation payouts.
Without insurance, you’ll have to cover the cost to repair or replace tools yourself and you could also be out of pocket if you have to take time off work due to injury or illness.
Do I need builders’ insurance if I’m a subcontractor?
If you work for a contractor, you’ll likely be covered by their insurance, but double-check this if you’re unsure.
It’s also worth noting that if you’re working unsupervised for a certain period of time, you may need to be covered by your own policy.
How can homeowners check that their builder has insurance?
Everyone wants their home improvements to be as hassle-free as possible, but unfortunately, things can go wrong.
So, for peace of mind, homeowners will want to ensure that anyone doing work on their house has the right insurance. This is to ensure they’re not left to foot a legal bill themselves, should anyone get hurt or if anything is damaged while work is being carried out. It’s also to protect them from having to fork out again for a job that’s been half-done or hasn’t been completed as it should be.
To confirm whether a builder has a valid policy in place, homeowners should ask to see a certificate of insurance, which they should do before any work is started.
What else should homeowners be aware of when renovating their homes?
When you’re having work done on your home, it’s important to tell your insurer or broker about this, so that your home insurance policy isn’t invalidated.
They will ask you to give full details of the work that’s being carried out and it’s possible they’ll put restrictions on your cover until the renovations have been completed.
If you’re thinking about hiring a builder to carry out some home improvements for you, these tips might come in handy:
- Agree on a price before any work is carried out, and make sure you have it in writing
- Work out a realistic schedule for when you expect work to be completed by
- Ask for an insurance-backed guarantee to protect both you and your builder
- Check whether the company the builder works for is registered and belongs to a professional body or trade association, like FENSA or the CPA
The construction industry comes with a high level of risk, which is why it’s important for builders to have insurance.
If you hire employees, you’re legally required to have employers’ liability insurance and if you use your vehicle for work, you’ll need to buy commercial vehicle insurance, or “business vehicle insurance”.
Not all types of builders’ insurance are required by law, but it’s a good idea to assess your risks and tailor an insurance policy so that you’re covered for everything you need to be.
It’s recommended that you buy public liability insurance and professional indemnity insurance to cover your legal costs and compensation if someone should make a claim against you.
It’s also a good idea to buy all-risk cover to protect you if the work you carry out is accidentally destroyed.
Optional builders’ insurance includes building warranties and guarantees, tool and equipment insurance, personal accident and sickness insurance and contract works insurance. This is to cover you for things like your company going bankrupt, financial losses from having to take time off work and your equipment being damaged, lost or stolen.
Without the right insurance, you could face fines, or have to cover legal costs and repair or replacement expenses yourself.
Homeowners should ask to see a builder’s certificate of insurance before any work is started and notify their insurer or broker of any home improvements they’re planning on having done, so as not to invalidate their home insurance policy.