Contract works insurance explained

Many business owners have limited understanding of exactly what is covered by their public liability insurance policy, which can leave them with a financial dilemma if they need to make a claim only to discover that what they are claiming for isn’t covered. Because of this, Contract Works insurance is often overlooked as an essential form of cover yet it can prove to be a very astute investment in your business to carry this type of cover.

What is Contract Works insurance and what does it cover?

Contract works insurance, sometimes known as Contractors All Risks, is an insurance specific to builders and other tradespeople and is a cover designed to protect building works in progress.

The policy will cover the cost of having to re-do work that is part of a contract, including the cost of the tools, materials and the labour required for the work, should the existing work be damaged by instances such as fire, flood, or theft during construction.

Whether or not you require Contract Works insurance depends on your client contracts and whether your clients hold you responsible for unfinished work on a construction site. Therefore, you should check all of your contracts carefully prior to beginning any work.

If you’re working on a new house build and a fire damages part or all of the property, or if a storm damages roof tiles that you have already placed, then Contract Works insurance could cover the cost of redoing the work from events such as:

• Damage caused by fire, flood, storm, vandalism or theft.
• Material damage to on-site plant machinery and equipment and to existing structures.
• Third-party property damage.
• Employee’s tools and personal property.
• Accidental damage to on-site materials.

What is not covered by Contract Works insurance?

Typically Contract Works insurance does not cover existing structures, e.g: you’re building an extension for a client and there’s a fire which damages the property. Contract Works insurance could cover the cost of rebuilding the extension, but not the cost of rebuilding the existing property. The rest of the damaged property would need to be covered by the client’s home insurance.

It is important to make yourself fully aware of what is not covered in the policy document. The policy will not pay for:

• More than its proportionate share if the damage is covered by any other insurance policy.
• Damage caused by fraud or dishonest acts by employees
• Damage to money (including coins, currency notes, postage stamps, National Saving Certificates etc)
• Alterations, such as your business being wound-up, carried on by a liquidator or permanently discontinued.
• Clean-up costs from damage caused by contagious disease
• Any loss or destruction caused by a cyber incident.
• Damage caused by welding or heat cutting equipment, hot air guns, blow torches, tar, bitumen or asphalt heaters.

(See the policy document for the in-depth list of exclusions)

What should you consider when purchasing your Contract Works insurance?

It is important to insure the value of your largest project, including all the labour and materials etc. If you purchase the correct level of cover you can work with peace of mind, whereas being underinsured could cause you significant problems in the event of a claim.

For example, if your largest project is worth £1.5 million over two years, then you will need £1.5 million of cover.

What kind of excess should you expect? 

The excess is the amount you pay towards a claim you make on your insurance policy. For example, if you make a claim for £1,000 for stolen tools and your excess is £200, then your payout will be £800.

Please note the figures shown are for illustrative purposes only and any excess applied to your quote may differ.