If you’re a property owner, builder, tradesman or contractor, you probably spend a lot of time fixing or making things happen. But what happens if all your hard work is wiped out by a fire, flood or another unforseen event? That’s where contract works insurance comes in and could save your business.
What Is Contract Works Insurance?
Contract works insurance is designed to protect your on-site work before it’s handed over to the client. It can pay for repairs or even a full redo if disaster strikes. Theft of equipment from the location can potentially also be covered. It’s incredibly handy if your contract with the client makes you responsible for the unfinished work, which many do.
Do I Really Need It?
If you’re wondering, “Do I need contract works insurance?” the answer is: check your contracts. If they hold you liable for work in progress, this cover is a smart move.
Chances are, if you have a “contractors all risks insurance” policy it will only cover damage to the work in progress and to the client’s existing property if you are found to be negligent. This potentially leaves both your business and the client significantly exposed to substantial losses from a great number of other risks.
Contract works is popular with:
- Building contractors
- Property developers
- Electricians, bricklayers, carpenters, plasterers, tilers
- Anyone working in construction who needs to protect their projects
Even if you’re a sole trader, it’s worth considering. As part of a broader tradesman insurance policy, it helps keep your business financially secure.
Plan Insurance can accommodate your Construction & Contractors Insurance needs. Just fill in our short call back form, and our professional brokers will be in contact to arrange your insurance.
What Does Contract Works Insurance Cover?
Here’s what’s typically included:
- Labour and materials: If you’ve just poured concrete or installed a kitchen and it’s damaged, cover can include both materials and your team’s time.
- On-site work in progress: Whether you’re mid-extension or halfway through new builds, this policy is all about protecting unfinished work.
- Damages from common risks: Think fire, storm, flood, vandalism or theft.
One of the top questions is “what does contract works insurance cover?” the simple answer is: what you’re currently building, up to a limit of your chosing, and against stated perils.
Insuring Works in Existing Structures: What You Need to Know
When construction involves an existing building, standard insurance routes can get complicated. Often JCT (joint contracts tribunal) contracts are used. The JCT is a UK-based organization that publishes standard forms of building contracts used in the construction industry. These contracts are designed to standardize the procurement process and allocate risks between parties involved in construction projects.
Here’s a quick guide to how it typically works under JCT contracts, and the common challenges:
Insurance Options Under JCT Contracts:
- Option A – Contractor insures the works (new builds).
- Option B – Employer (client) insures the works (new builds).
- Option C – Employer insures both the existing structure and the works (refurbs/extensions), in joint names with the contractor.
Key Challenges For Insuring Existing Structures During Construction Projects:
The main obstacle is that contractors can’t insure a structure they don’t own. When the client doesn’t own the freehold of the building their landlord may refuse to add contractors to their policy, due to insurer reluctance, internal risk policies, or tenancy complications.
The addition from JCT’s 2016 suite of contracts of the C.1 Replacement Schedule makes allowance for tailored insurance arrangements. This is an optional document enables parties to replace the standard insurance requirements for existing structures under Option C with customized provisions. This is particularly useful when the employer doesn’t own the freehold of the building and the standard joint names insurance policy for existing structures isn’t appropriate.
Common Solutions:
- Property owner (Landlord) includes contractor – either as a named insured or via a waiver of subrogation (a subrogation waiver is an agreement that prevents an insurer from trying to get money back on a claim caused by a negligent third party and insurers will often resist including them.)
- Tenant (if one is occupying the building) insures structure – this is rare and usually is limited to major refurbishments.
- Contractor covers it as third-party liability – Most common workaround, but often costly.
Revenue Considerations:
- If the finished building will be generating income for the owner, indemnity periods to cover liability for loss of income will need careful planning.
- Stated construction revenue cover will need to align with any property business interruption insurance.
Pro tip: Always consult a specialist insurance broker early on to ensure the right cover is in place before work begins.
Plan Insurance can accommodate your Property Owners & Landlord Insurance needs. Just fill in our short call back form, and our professional brokers will be in contact to arrange your insurance.
Real-World Claims Examples
It’s always helpful to see how this might play out. Here are a couple of common situations:
House Extension Fire
You’re nearly finished with a £100,000 extension when a near by fire spreads and guts half the structure. Contract works insurance pays to reinstate the building.
Storm Damage to a New Build Roof
You’re constructing a small commercial unit and strong winds rip the roof off before it’s watertight. Your policy covers the cost of replacement.
What’s Not Covered?
It’s important to know what contract works insurance doesn’t cover. This includes:
- Existing buildings: If you’re building an extension and the main house gets damaged via an incident that you are not responsible for, the resutling losses will usually be the customer’s liability but you should always check your contractual responsibilities.
- Terrorism-related damage
- Wear and tear or faulty design
Always check your policy documents for the full list of exclusions.
How Much Cover Do You Need?
Here’s a quick guide for buying contract works insurance in the UK:
Choose a cover level that matches your largest project, including both labour and materials. Even if the work spans 18 months, the full contract value should be covered.
Example:
If your biggest project is a £2 million housing development, aim for at least £2 million in cover.
Add It to Your Tradesman Insurance Package
You don’t have to buy contract works cover on its own. Many providers will offer it as part of a package of important covers designed to meet the needs of tradesmen and the construction industry. Amongst other polices, at Plan Insurance Brokers we can also offer:
- Public liability insurance
- Employers’ liability
- Tool cover
- Plant and machinery insurance
- Site insurance
- Motor Fleet Insurance
A well-structured builders insurance package helps you manage risk while keeping your admin simple. Click here to visit our Construction & Contractors page, or get in touch with our expert team today for a quote: 0800 954 0778
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