A complete guide to contractors’ all risk insurance
Anyone involved in construction, from designing to building, should know the importance of proper site insurance. There are many potential liabilities in this line of work – the bigger the project, the more risks there will be.
Unforeseen incidents on your construction site, from floods and fires to vandalism and theft, can lead to costly repairs or replacement work. This is where contractors’ all risk insurance comes in to cover these costs for you.
As a contractor, you would still be obligated to complete the work, and the customer wouldn’t want to pay twice over – but why should you be out of pocket for an incident that wasn’t your fault?
You deserve the peace of mind that this kind of coverage can give you, so keep reading to learn more about all risk contractors’ insurance policies and how they can help you and your business.
This type of flexible insurance policy provides far more extensive cover than the typical ‘named perils’ format. Also known as CAR insurance for short, or construction insurance, it offers financial support for contractors and construction companies.
While ‘named perils’ insurance only allows you to claim for certain conditions specified in the policy, ‘all risk’ insurance allows you to claim for more casualties that aren’t explicitly excluded. So, even if an incident category isn’t mentioned, the policy could still cover it.
‘All risk’ essentially means that the policy will cover all types of damage to works and equipment, unless the terms expressly omit the particular occurrence. The ability to claim for a range of property damages and third-party injuries can be very useful if something does go wrong.
Contractors’ all risk insurance is more or less an all-in-one policy that encompasses other common types of project insurance, including contract works and public liability cover. You can get separate policies for these, but it’s more efficient and cost-effective to roll them into an all risk policy.
In order for clients to get their own residential or commercial cover for the building in progress, their insurers will expect you (the contractor) to at least have the correct public liability insurance.
All risk insurance for contractors can generally be taken out by anyone working in any type of construction, from builders and bricklayers to plumbers and plasterers. Any business responsible for construction site works should consider taking out a contractors’ all risk policy.
The contract with the client should set out the obligations of each party, including who is responsible for ensuring each element of the build. It’s usually easier for the contractor to take care of it, but a joint CAR policy is sometimes preferred for larger projects with multiple parties involved.
For example, both the employer and contractor may want to be named in the same policy, with the option of also naming finance providers (e.g. banks or individual investors). All parties then have the right to claim against the insurance policy if damages or injuries affect their stake in the project.
In such a case, where multiple parties might make a claim under the same policy, all named parties have the additional responsibility of informing the insurer of any incidents that could lead to a claim, even if there are no intentions of making one at the time of notifying the policy provider.
The level of cover and length of the policy term can vary from project to project, so you always need to triple-check what’s covered and what isn’t. These contracts tend to include the following policies:
The ‘contract works’ element provides protection for the property while it’s being built, including the construction materials being used and stored onsite. If the structures in progress are damaged or materials stolen, the policy should cover the costs of repairs and replacement materials. However, it won’t cover any pre-existing structures on the site that you might also be renovating or converting.
If a third party is injured or their property is damaged while on your project site, they may make a claim against you. Having public liability cover means you won’t have to worry so much about legal fees and compensation if this does happen. A ‘third party’ could be anyone on the site who isn’t a contractor or employee, like sub-contractors, customers, suppliers, and members of the public.
Even if you aren’t actually employing anyone, employers’ liability cover tends to be a standard contractual requirement. This is because UK employment law makes it mandatory for companies to protect their employees while they’re working for you. If an unfortunate accident happens on your site and your employee suffers illness, injury, or even death as a result, this can cover their compensation.
There is a wide variety of expensive professional equipment in use on a building site at any given time, from scaffolding and Portakabin offices to cranes and excavators. Whether your company directly owns the machinery or you’re temporarily leasing it under a hire agreement, you need to be sure that your insurance can cover repairing or replacing equipment that gets damaged in your custody.
When it comes to power tools and related hand-operated equipment, many employees prefer to use their own – though some businesses prefer to supply company equipment. In either case, your site insurance should also cover damage or theft of own tools and any other personal belongings onsite. This usually won’t include sub-contractors, who should have their own cover in place for their own tools.
Depending on the provider, it’s possible to extend the coverage of builders’ all risk insurance to specifically include further conditions. A common option is non-negligence insurance, which covers you against claims for unexpected damage to neighbouring property resulting from your ongoing works. Legal expenses insurance is also useful should you need to seek expert legal guidance.
While CAR insurance has the advantage of covering a spectrum of policies, unfortunately, it can’t actually cover everything. The all risk insurance contract should explicitly state what the policy holder or holders won’t be able to claim for. The following are common all risk insurance exclusions:
Sometimes known as an ‘act of God’ or force majeure (French for ‘greater force’), any damages from an unpredictable and unpreventable event with no realistic human control over the outcome are often excluded from all risks insurance cover. These types of perils could be natural disasters like floods, hurricanes, and earthquakes, sudden events like riots or war, or pollution or radiation.
Different insurers will have different methods for assessing risks, and the cost of contractors’ all risk premiums will depend on a range of factors. Here are some common considerations that usually affect the cost:
Since this type of insurance covers you against a greater number of possible events, premiums are higher than other less extensive policies. However, you can try to keep your contractors’ all risk insurance costs down by avoiding riskier work in dangerous locations, and completing smaller contracts. You can also opt for the standard cover without paying extra for tailored extensions.
Whatever you’re looking for from contractors’ all risk insurance, we’re sure that we can help you here at Architects Certificate. Not only are we a leading provider of structural warranties with our ABC+ 10 Year Structural Warranty, but we also provide contractors’ all risk insurance quotes.