Builders and contractors take many steps to ensure that their projects are safe, both for their workers and for members of the public. However, construction carry’s many hazards and risks and, as the owner of the project, it is up to you to identify and assess this on an ongoing basis and ensure that workers’ safety and health always remains a priority.
Should accident or injury occur, it will be up to you to cover any eventualities, and these can be extremely costly. This is where liability insurance for construction companies comes in.
In this in-depth guide, we will look at this form of insurance in detail.
What is Construction Liability Insurance?
Construction liability insurance is designed to protect the builder from liability in case of property damage, injury to the workers, or injury to members of the public. Without this cover, you will be required to foot the bill in case any unexpected events take place.
It is important to note that construction liability insurance is an umbrella term that covers a wide range of insurance covers. These include:
- Public liability insurance
- Product liability insurance
- Employer liability insurance
- Contractors all risk insurance
- Plant and equipment insurance
- Professional indemnity insurance
- Structural warranty
- JCT (Joint Contractors Tribunal) insurance
What is Public Liability Insurance in Construction?
Public liability insurance helps to protect the employer in case of personal injuries or death on the construction site. It also covers loss or damage to property of third parties. If there are legal costs involved, the insurer will also cover these fees.
Legal fees can add up quickly in complex or contested cases, and this can impact your business significantly. Public liability insurance can cover the employer when claims are made by:
- Members of the public
- Clients
- Independent sub-contractors
It is important to note that public liability insurance may not cover injury or losses that result from negligence on your part. These losses fall under professional indemnity insurance. Also, you won’t be covered for claims made by your employees, as these issues fall under employers’ liability insurance.
An example of a situation where public liability insurance will be used, is when a piece of equipment falls from the construction site and causes injury.
What Does Liability Insurance Cover for Construction?
As noted earlier, liability insurance in construction comes in many different forms. It is generally meant to protect you from losses that can make your project significantly less profitable. Let’s look at the types of insurance and what they cover.
- With product liability insurance, you will be protected against claims of injury or property damage made against you by third parties. It will also pay for the legal costs you will incur in defending a claim. If you lose the case, the insurance company will cover the compensation awards.
- Another type of liability insurance in construction is employers’ liability insurance. This cover is compulsory for all employers, and it helps to cover employees who are injured or who become sick as a result of the work they undertake on the construction site. You should note that there is a daily fine for employers who don’t have the necessary employer’s liability insurance.
- Contractors all risk insurance is a policy that covers risks that are generally associated with construction. It is usually issued under the contractor and principal client of the project. This form of insurance will cover you for the construction period, but it can also be extended to include the defects liability period. It will pay for public liability, unforeseen damage or loss in the project, and business interruption.
- Plant and equipment insurance is mostly taken by businesses that have to hire construction equipment. In the case of tools being damaged, the insurer will cover the continued cost of hiring the equipment. They will also pay for the damage or loss of the items as per the terms stated in the hiring agreement. You should note that plant and equipment insurance does not cover the normal wear and tear of the items, and it may also not be used for claims resulting from arson.
- Professional indemnity insurance is designed to cover the company in case claims arise as a result of poor conduct by the builder. With this policy, the insurer will also provide assistance to the builder when dealing with issues that could lead to the rise of a claim.
- A structural warranty is also essential in construction. This warranty will be activated once the project is completed, and it will usually have a validity period of ten years. Its purpose is to cover any costs resulting from structural issues in the property. For the structural warranty to be valid, you will have to ensure that you carry out proper maintenance of the property. Also, you should always obtain the warranties from A-rated insurers for peace of mind.
- JCT insurance is also an important consideration, as it protects the business against claims in case of damage to neighboring properties. This damage can result from collapse, vibration, or weakening of the support structures.
How Much is General Liability Insurance for a Construction Company?
Prices vary significantly from one business to the next and, while the average UK annual public liability insurance premium costs in the region of £120, some small businesses and sole traders will pay a lot less.
Insurance companies are usually flexible with their policies, and you can obtain plans that merely cover the essentials. You should note, however, that cheaper insurance plans usually offer very little cover and may not be very useful when claims are made against your company.
It is always advisable to consult with an insurance broker as they will be able to advise on the cover for your exact needs and negotiate the best price on your behalf.
Before you pay for construction liability insurance, you should make sure you read the policy document carefully to determine which items are excluded and ensure that you are adequately covered.
How Much is Construction Liability Insurance?
The cost of construction liability insurance will vary depending on the type of policy you are taking, as well as the level of coverage you want. When calculating the cost of the insurance, the company will take into account the percentage of your turnover that is paid out to subcontractors. If the percentage is very high, the exposure to liability claims will increase.
Again, you may be tempted to go for the cheapest options on the market. This could end up costing you dearly though, as such plans may not provide the level of support required. In most cases, you will get what you pay for.
Before you take up the cover, you should consider the value of the project. Also, find out the worst-case scenario and determine whether the insurance cover will be sufficient for such an eventuality. It is also advisable to discuss the insurance plan in detail with your insurer to ensure that you understand the terms properly.
Conclusion
Construction liability insurance is extremely important for all construction companies. It includes a wide range of insurance policies, such as public liability insurance, product liability insurance, professional indemnity insurance, and plant and equipment insurance.
Even if you follow all safety standards, you will still be exposed to certain risks in the construction of a property. With these insurance plans, you will not need to foot the bills when the unexpected happens. This can help to maintain the profitability of the project.
Always carefully review the terms of the insurance cover you are considering taking and take the time to discuss the proposed plan with your insurer.
