Who needs Construction Insurance?

Any contractor, subcontractor or tradesperson who works in the construction industry should consider carrying various types of construction insurance. Whether you’re a builder, project manager, electrician, plumber or any other kind of professional associated with the construction industry, if you are contracted to work on a building project, you need to carry some form of construction insurance.

Moreover, construction insurance is not just something that the large, national building firms need. Small businesses and even one-man bands need construction insurance as well, as the risk of accidents, injuries and damage is just as high for smaller firms.

What is construction insurance?

Construction insurance is a type of liability insurance that provides coverage for damages and losses associated with the construction process. This risk insurance may include protection from slips, falls, property damage, bodily injury on-site, or mistakes made by contractors during the course of their work.

Construction insurance policies help to cover any legal fees and settlements related to those claims. For example, if a contractor or subcontractor inadvertently causes damage to a property during the construction process, the policyholder can make a claim on their insurance to cover any costs associated with repair and replacement.

Why is construction insurance important?

Construction insurance is important because it can provide protection from financial loss due to errors, damage or other liabilities associated with the construction process. It helps to limit personal and professional liability, and covers the costs of repairs, replacement and legal fees that may occur as a result of accidents, injury or mistakes during the course of work.

Without this type of coverage, contractors and tradespeople can be left with large bills to pay if something goes wrong. In some cases, the financial burden may be too much to bear and could even lead to bankruptcy or other legal action. For this reason, insurance is a cost-effective way of protecting yourself financially in case something out of your control should arise during the project.

Risk of unexpected costs with your construction project

The simple fact is that due to the processes involved, building work is hazardous. As an example, if you are a construction industry worker you are four times more likely to die due to an accident at work. There have been nearly 200 fatal accidents in the construction industry over the past five years.

In addition to the potential for serious injuries, the chance of serious property damage is also high. Heat use increases the risk of accidental fires and, as a large amount building work happens in the open, there is a greater chance of property being stolen or damaged by a storm.

Although these risks can be minimised by taking adapting your working practices the risks cannot be totally eliminated. No matter how experienced you are and how carefully you work, accidents will still happen. When they do happen, the costs can be significant and, at that point, you may well be glad of your construction public liability insurance, which will help protect your construction company and workers against these expected costs.

Public liability insurance

Public liability insurance is essential to any construction business, large or small. It’s a legal requirement in some states and provides peace of mind for contractors as it helps cover the cost of compensation claims if you are found to be at fault. This can help protect your business from financial turmoil due to unexpected costs. Without it, you could end up footing the bill for medical bills, legal costs and more.

Professional indemnity insurance

In addition to public liability insurance, it’s important for most contractors and tradespeople in the construction industry to also consider both professional liability insurance and indemnity insurance. This is particularly important for any technical professionals such as architects, engineers and surveyors who may be held liable if their advice or designs for construction projects are found to be faulty.

Professional indemnity insurance helps cover any legal costs which may be made against you, giving you an additional layer of protection.

Size doesn’t matter

It can be tempting to think that it’s only the large, national firms that need construction insurance because if you’re a small business and are only doing minor repair work, without general liability insurance, the chance of an accident is lower.

To an extent that’s true. If all you are doing is minor repairs to domestic properties, there is less chance of an accident happening than there is if you are working on large, complex projects.

But there is still a chance of an accident. If a member of the public ends up being seriously injured, the compensation claim that they make could cost several hundred thousand pounds. Similarly, one moment of carelessness with a blowtorch could result in an accidental fire that causes several hundred thousand pounds in damage.

Unlike the larger, national firms, smaller businesses are less able to absorb these unexpected costs. They are also more likely to need the assistance that a construction insurance company will be able to give them, in order to help them handle the consequences in the event of an unexpected loss.

Because of this, even a one-man band builder who only does minor building work is going to be someone who needs construction insurance.

Legal & other requirements

Although construction insurance is something that anyone working in the construction industry should have, there are two situations where you could be someone who needs construction insurance because it’s a legal requirement for construction companies.

If you employ anyone, even if that employment is only on a casual basis, you are legally required to have employer’s liability insurance – a type of construction insurance policy, which covers the cost of claims for compensation due to accidents that employees have suffered as a result of their work.

Similarly, if you are operating vehicles anywhere that the public can access, commercial auto insurance is a legal requirement. Failing to have either of these two types insurance if you are legally required to have them could result in your business facing heavy fines.

But it’s not just the law that makes construction insurance a requirement. It is quite common for the contract between a main contractors and a subcontractor to make it a requirement for the subcontractor to have public liability insurance. Often the contract will also make it the subcontractor’s responsibility to insure the plant, equipment, materials, etc. on site against damage or theft.

If you are a subcontractor, it’s quite possible that you are someone who needs construction insurance to comply with the terms of your contract, even if it isn’t a legal requirement. What’s more, failing to have the insurance could result in you being removed from the project – and no contractor wants that!

Construction insurance is essential for anyone working in the construction industry, from large national firms to one-man band builders. It can protect your business from financial turmoil due to unexpected costs, and can also be a requirement of contracts with larger contractors. Make sure you shop around for the best construction insurance provider for your business .