Every business incurs costs, and the construction industry is no different. There is a need to invest in tools and materials. Money needs to be spent on marketing the business to new clients and projects to work on. There are staff costs.
Nobody likes spending money that they don’t have to spend, but with each of these costs, you can see what you’re getting in return. When you are analysing your business costs, though, you could be forgiven for thinking, “why do you need construction insurance?” – particularly if you’ve never had to make a claim. It can seem like money being spent without you getting anything back in return.
So, why do you really need construction public liability insurance?
Even if you have never had an accident in the past, that doesn’t mean that an accident won’t happen in the future. Nobody is perfect, and some accidents are inevitable in any case. And some of those accidents could lead to large, potentially unaffordable unexpected costs.
Compensation claims made by people who have been injured due to your activities can easily cost hundreds of thousands of pounds, for instance. A claim of that magnitude could result in an uninsured business facing bankruptcy.
It is also possible that your own property, property that you have hired in, or your work in progress could be damaged or stolen. Because a lot of building work happens out in the open, the risk of property being damaged by storm or flood is high, and due to the fact that construction work can involve the use of heat, the risk of accidental fire damage is high. In addition, property in the open has a higher chance of being vandalised or stolen.
You might find that you are unable to work due to an injury or illness. Because there isn’t sick pay for self-employed people in the same way that there is for conventional employees, you need personal accident & sickness insurance to replace your lost wages if you’re unable to work, so there’s one less thing to worry about during your period of incapacitation.
Some types of insurance are a legal requirement.
You are legally required to have employer’s liability insurance if you employ anyone. People can be deemed to be employees, even if they are only employed on a casual basis. They don’t have to be paid through a PAYE payroll scheme to be classed as an employee.
There is a fine of up to £2,500 per day if you are caught without this insurance. You are also required to display an employer’s liability insurance certificate at your place of work and you can be fined £1,000 if you fail to do so.
Motor insurance is a legal requirement if you are using a vehicle in a public place. As well as roads, this also means other places that members of the public can access, such as a car park that the public can use.
As well as a fine, if you are caught without motor insurance, there is a chance that your driving license could be endorsed or you could be banned from driving. There is also a chance that your vehicle could be impounded.
Permission to work
Public liability insurance is not a legal requirement, but often a main contractor will refuse to let a subcontractor onto a job site until that subcontractor has produced evidence that there is a valid public liability insurance policy in force. In other words, it is effectively a requirement because if you don’t have public liability insurance, you cannot work.
A frequently asked question is, “why do I need construction insurance when the main contractor has insurance covering the project?” This is because the main contractor wants to keep their insurance premiums as low as possible by ensuring that any claims arising from something the subcontractor has done is dealt with by that subcontractor’s insurance rather than via their own insurance.