Guide to Contractors Insurance: Why You Need Construction Insurance

If you work in construction you will know that there are many risks involved whilst on the job that could potentially lead to significant financial repercussions. Knowing this, it’s crucial that you have the correct cover in place to protect yourself, your business, and your employees – just in case as the consequences could be detrimental. However, navigating the world of construction insurance can be confusing, as there are so many different areas that require cover, and it can be difficult to understand which insurance you actually need.

Whether you’re an electrician, plumber or roofer, whichever trade you specialise in there is construction insurance that is suitable for you. But what contractors insurance do you need? Luckily, East Yorkshire Insurance Brokers are here to help. In this blog we explore why you need construction insurance and what cover you need depending on what tradesman you are.

So whether you’re wondering why you need employers liability, the difference between bona fide subcontractors and labour only subcontractors, or what the risks involved in construction are and why you need insurance for them, we’ve got you covered. Let’s dive into the ultimate guide to construction insurance so you can make sure that you are fully protected.

Why Do You Need Construction Insurance

When it comes to working in construction, there are many factors you need to consider when picking the right insurance. Since construction is so hands-on, it comes with its own unique set of risks that you need to be aware of so you can make sure that yourself and your employees are covered in case something goes wrong. From being a sole trader to employing a whole team of contractors, it’s important that you have the correct cover in place for your specific circumstances. Whether you’re worried about property damage or health and safety, the repercussions of not having suitable insurance in place could be devastating.

There are different covers under construction insurance that protect against specific scenarios. If you are only just hearing of contactors insurance, it can be hard to know which cover you need. Here are different types of contactors insurance and why you need them:

Employers Liability Insurance for Contractors

Having Employers Liability Insurance for contractors in place is not just a necessity, it is a legal requirement. If you employ contractors or subcontractors, you are responsible for their health and safety. If something happens to them while working for you (for example they become injured whilst operating machinery) Employers Liability Insurance for contractors will cover the costs of any claims of negligence from the employee. Accidents can happen to anyone, so it’s vital that this is something you are protected against.

Because of the nature of the work, your employees could become sick or develop health issues such as hearing loss or respiratory problems from working with machinery and not wearing the right safety equipment. Between 2020 to 2023 69,000 construction workers reported suffering from work related ill health. You’re responsible for your employers wellbeing, and If one of your contractors becomes ill due to the work they’ve been doing you could be liable! Employers Liability Insurance for contractors ensures that the costs associated with the illness are covered from legal expenses to medical costs and compensation claims.

Construction Public Liability Insurance

Unlike Employers Liability, Construction Public Liability insurance is not a legal requirement, however it is definitely a cover you should really have. No matter if you own a large construction business, or you’re a self-employed tradesman, you are liable for any damage caused whether that’s to a member of the public or to their property.

This is especially important to have in place if you are working on commercial sites that the public have access to, if they were to become injured you will be liable. Therefore, Construction Public Liability Insurance will cover medical expenses or compensation. For those who are self-employed you shouldn’t overlook this cover either. For example, if you are a plumber working in someone’s house and a leak occurs following the work you’ve carried out, they could sue you for the damages. Having Construction Public Liability insurance in place will cover the costs of repairs and give you peace of mind when dealing with the public.

Management Liability Insurance

When it comes to owning or managing any type of construction business, there are a plethora of regulations you need to follow. From health and safety to employment practices, if your company is found to have breached any of these requirements, you could face legal repercussions from claims made against the management of your business. 

Legal fees resulting from such claims could be detrimental to your business, especially smaller firms and could result in your business operations shutting down temporarily or even for good. Management Liability Insurance will cover any legal costs from claims made against your management, making sure you are financially capable if this risk ever occurs.

Contract Works Insurance

Construction projects not only take a lot of time, but they also cost money, and if there happens to be damage as a result of fire, flood or vandalism, this could set you back financially. Contract Works Insurance covers the cost of repairing or redoing work on a construction site, giving you that peace of mind in the result of a disaster.

Contract Works Insurance will also cover costs due to accidental damage and extend to tools and equipment that are hired in, in order to work on the project, so you can relax knowing you are prepared for the unexpected and are covered.

Hired In Plant Insurance

Construction projects, big or small, may require you to hire expensive machinery. When you are renting equipment or machinery for your construction site, you are still liable if anything happens for example, damage or loss. Hired In Plant Insurance covers any costs that occur if there is any loss or damage of plant and machinery, as a result from flooding to theft, anything could happen, and you need to be prepared.

Having Hired in Plant Insurance in place is crucial when renting equipment whether that be forklifts or concrete mixers, as the machinery isn’t yours to own, if something happens to the equipment the financial repercussions could be huge. Hired In Plant Insurance will make sure that you are prepared for any unforeseen events. 

Own Plant / Contents Insurance Insurance

As a contractor, the tools and equipment you own are essential to be able to complete projects. If you own your own diggers, plant or machinery, this can be extremely expensive to replace in the result of accidental damage or theft. Construction sites are often targets for theft and vandalism as they store expensive equipment, own plant or contents insurance covers the cost of replacing or repairing stolen or damaged equipment, which could be financially crippling without insurance.

Having contents insurance in place will give you peace of mind knowing that core assets are protected against unexpected events, whether that’s a fire or theft, making sure that construction projects can still go ahead as planned.

Who Needs Contractors Insurance

Contractors all risks insurance is essential for a wide range of people in the construction industry. Whether you are a sole trader or run a construction business with employees, this type of insurance is crucial to protect against risks that come with working in this field.

No matter how big or small your operation is, not having the correct construction insurance in place could be a contributing factor that potentially puts you out of business. As working in construction means you deal with the public or you may hire your own employees, if you have a claim of negligence against you as a result of injury to someone you’re responsible for, the legal costs could be devastating.

To be on the safe side and to make sure your business stays afloat, making sure you have the correct Contractors Insurance in place could be what saves you in the case of unexpected events. Not sure what Contactors Insurance you need? Here are some examples of who may need this cover in place:

Labour only subcontractors

A labour only subcontractor is someone who only supplies their labour, they’ll use your tools/equipment and work under guidance of the contractor. They are essentially temporary employees and because of this the contractor needs insurance in place to cover them, the same as they would with permanent employees. This means that Employers’ Liability is a necessity, as if the subcontractor becomes injured while working, the contractor is liable for them just as they would be with anyone working for them.

Bona fide subcontractors

Bona fide contractors on the other hand are much more independent, often providing their own tools, materials and carrying out work without direct supervision. This means that they should have their own insurance in place. However, the primary contractor may also need coverage to protect against any liabilities arising from the subcontractor’s work, for example Public Liability.

Sole traders

Self-employed sole traders or individual business owners who operate alone are particularly vulnerable to personal financial losses that can arise from lawsuits or accidents. Therefore, Contractors all risks insurance is critical to protect their business assets and personal finances. They may want tools cover to take care of the costs of any loss, theft or damage to their equipment that they use, as this could be expensive to replace, especially for small businesses or self-employed individuals.

Larger construction & trades companies

Larger businesses will face more complex risks than self-employed individuals due to the scale of their operations. This can include employee related liabilities, large scale contractual obligations, and potential damages from major projects. They may require insurance that covers a wider range of scenarios and higher coverage limits.

Risks You Need Contractors Insurance For

When working on a construction site, there are many risks that could potentially jeopardise the project as well as the safety of workers. These risks can be serious and out of your control such as fire and theft, and not to mention other specific hazards that can occur from operating machinery that could lead to bodily injury. Since there are a variety of complex risks that could not only disrupt business operations but also seriously compromise the health and safety of those working on the site, it’s vital that you don’t overlook these hazards and are prepared for such events. 

Understanding these risks is crucial for obtaining the right insurance coverage to protect against significant financial loss. Here are some risks contractors may face and what insurance will cover them:

• Fire

Construction sites are especially vulnerable to fires, which can be sparked by electrical faults, heating equipment, and the use of flammable materials. Fires not only endanger lives but can also result in severe damage to the construction materials and the structural integrity of whatever is being constructed. Having Contract Works Insurance in place will cover the costs of repairing the damage to the work that was compromised as a result of the fire, so you won’t be out of pocket in the event of this risk happening.

• Theft and Vandalism

Performing construction work often involves using valuable machinery, tools and materials that are attractive targets for theft and vandalism. The financial impact of replacing stolen or damaged equipment can be substantial. Hired In Plant insurance will cover the costs of replacing any stolen equipment or machinery you’ve hired, so you won’t have to deal with the financial repercussions of paying for the compromised equipment that could be expensive.

• Weather-Related Damage

You can’t control the weather, and severe conditions like storms, floods and even lightning can cause significant damage to construction projects. Having Contract Works Insurance in place will cover the costs of repairing any work that was damaged due to the extreme weather conditions, so you’re not financially set back. Hired In Plant Insurance will also cover the costs of replacing any expensive equipment you hired for the project that may have been damaged, so you don’t have to worry about the financial implications of that either.

• Accidental Damage

Accidents can happen anytime, even with the best safety protocols in place. Dropping an expensive tool or experiencing a machine malfunction can lead to extensive damage, whether that’s to the equipment or to part of the project that’s already constructed. Contract Works Insurance will cover any accidental damage to the current project, giving you peace of mind when working on construction projects.

• Third-Party Injuries or Damages

Despite having health and safety policies in place, there’s always a risk that third parties like visitors or bystanders could be injured at a construction site, or even surrounding properties that could be damaged due to construction activities. If a member of the public or their property does become harmed as a result of the construction, they could put in a claim which could be financially devastating. Public Liability Insurance will cover the legal expenses, so you can relax knowing you’re covered in the result of an accident.

Construction Insurance FAQs

What insurance do you need as a contractor?

Employers Liability Insurance is a legal requirement if you hire employees, or use labour only subcontractors, you are liable for anyone you hire. Although not a legal requirement, you will also need Public Liability Insurance to cover the costs of any claims made against you in the result of injury or damages caused by the work you do.

What insurance does a self-employed builder need?

Self employed sole traders will need builders Public Liability Insurance in place to protect yourself from any claims made against you in the result of damage or injury caused by your work. As the financial repercussions could be more damaging to those who are self-employed, it’s important that you have Builders Public Liability Insurance so you’re covered in the event of something happening.

How much does construction insurance cost?

The cost of construction insurance can vary depending on the type of cover you need. For example, big construction companies with hired subcontractors will require specific insurance coverage compared to sole traders. Contact East Yorkshire Insurance Brokers today and we can provide you with a free quote.

Choose East Yorkshire Insurance Brokers For Contractors Insurance

Since the world of Contractors all risks insurance can be difficult to navigate, with the range of risks involved in construction and the different covers available, seeking help from an insurance broker can make this process a breeze. At East Yorkshire Insurance Brokers we are here to help. With over a decade of experience in the insurance industry, we have extensive knowledge on construction insurance and will have a thorough understanding of what you need to be protected against.

We always have you in mind. This means that when arranging your Contractors Insurance, we’ll guide you through the process to ensure you only have the cover that you need. Still need help sorting your Contractors all risks insurance? Get in touch with us today for an insurance review, and get peace of mind knowing you’re protected from any potential risks that may come your way.

Road Risk Cover for Contractors

Since contractors often use equipment such as diggers, cranes or other heavy machinery, if you use these on public roads you need to have road risk cover in place. This type of insurance is critical not only for compliance with legal requirements but also for financial protection in case of accidents involving third parties. 

If the equipment you own causes harm to someone or damages another vehicle or property whilst on the road, as the contractor you are liable. Road risk cover will cover the costs of claims made by third parties, including medical expenses, repair costs and legal fees. This coverage is especially important for contractors who frequently transport or use heavy equipment in areas accessible to the public.