Do I need builders risk insurance?
Navigating the world of insurance can be daunting, especially for those in the building trade. Whether you're a seasoned professional or just starting, understanding builders risk insurance is crucial for your business’s security and legality.
Why is builders risk insurance important?
If you have contracted with a client to carry out work, it is your responsibility to finish the job, even if you are forced to start again because the work has been destroyed.
Builders risk insurance, more typically referred to as contractors all-risk insurance, covers various risks associated with building new structures, from accidental damage to materials and equipment to delays caused by unforeseen events.
Without this insurance, you risk facing significant financial losses if something goes wrong. This could mean paying for the damage, repairs, and materials.
In addition to being a heavy financial burden for your business, your reputation could also suffer if you cannot afford to complete a project.
What does builders risk insurance cover?
Property damage
Damage to the building or structure under construction, including materials, fixtures, and equipment. It helps cover the cost of repairing or replacing what's been damaged.
Theft and vandalism
Loss of materials or damage to the construction as a result of items being stolen or recklessly damaged by a site trespasser. This part of the policy helps recoup resultant losses.
Natural disaster
Damage caused by events like storms, floods, or fires. Given the unpredictable nature of weather and other natural events, this coverage is vital for mitigating potential losses from such occurrences.
Delay in completion
Construction projects have deadlines, and any delay can be costly. This coverage helps manage the financial impact of unexpected delays, such as additional expenses or lost income.
Potential exclusions
It’s important to note that builders risk insurance does not cover any original / pre-existing structures. If you are building an extension on a home, it will not cover the original building.
It also does not cover damage caused by certain ‘Acts of God’ (such as an earthquake) or acts of terrorism or warfare.
Legal and contractual requirements
In the UK, while builders risk insurance is not legally required, many clients and contracts require it. It is often a condition in contracts, especially for large-scale projects.
Not having this insurance could mean losing out on potential contracts or being in breach of your contractual terms.
Is builders risk insurance the same as public liability insurance?
Public liability insurance covers injury or damage to third parties; builders risk insurance focuses on the construction project itself.
However, builders risk insurance may be offered alongside public liability insurance with other forms of cover, as part of a comprehensive package.
This might include tools insurance and plant cover, professional indemnity insurance, and business interruption insurance.
Do I need builders risk insurance for small projects?
Smaller projects might have lower risk, but the potential financial impact of unforeseen events can be just as significant.
Can I get coverage for a project already underway?
You can usually obtain builders risk insurance for projects at various stages, but it’s best to consider coverage before the project starts.