Guide to Contractors' Insurance

What is contractors insurance?

Why do you need contractors' insurance, what does a contractors' insurance policy typically include and what are some common exclusions? Read our guide to find out more about contractors' insurance.

Contractors' insurance is designed to protect you against a variety of potential claims (for example, a Public Liability claim), as there are many opportunities for injury or damage caused to visitors or their property whilst visiting sites at which you are working as a contractor. Contractors' Liability insurance covers your legal defence costs when allegations of injury or damage to others or their property is made against you. Potentially, the awards that can be made as a result of a successful claim can be substantial. If you employ direct employees or labour only sub-contractors to help you, then you’ll also need Employers Liability insurance by law. This will cover your legal defence costs for claims made against you for employee injuries caused while working for you if you are alleged to be at fault.

Whether you take on high or low-risk contract jobs, contractors' insurance can help to provide protection. It is typically possible to choose different cover types to suit your needs. The policy can cover the loss or damage to the Contract Works themselves, and/or you can select cover for your tools, and include a whole range of hired equipment.

Do I need contractors' insurance?

Even spurious claims can result in awards that cause financial hardship, so if you are a contractor, it is in your best financial interests to obtain contractors' insurance. The likelihood of an injury or damage-related incident increases with larger or more hazardous projects, and could result in higher costs to contractors.

The cost of replacing equipment or tools alone can be hugely expensive - especially if they are specialised tools. Contractors' insurance can help to protect you in this instance and will also give you greater peace of mind when using your own or hired equipment.

If you employ others on contract work, you will need employers' liability insurance.

What level of contractors' insurance do I need?

Standard Contractors' Liability cover will generally include public liability for a specified limit of indemnity selected by you – normally £1m, £2m, £5m or higher limits are available. When considering a level of indemnity suitable for you, you should consider:

The types and values of the properties you are working on.
The types of business that could be interrupted due to an incident caused by you
Are you only doing purely new build work where there are lower risks due to unoccupancy, in comparison to the increased risks associated with refurbishment and general maintenance while working on occupied premises?
Do you undertake any high-risk activities such as the use of heat or work at height or depth?
Are there any contract specified or customer requirements, where you are required to arrange minimum levels liability cover?
For Contractors' All Risks Insurance - what is the value of the contract? How much would it cost to rebuild the ‘Contract Works’ in the event of a total loss such as fire?
What are the values of building materials you hold on site awaiting construction?
What about the replacement values of your tools and equipment?
What is your responsibility to the Hire company for loss or damage to hired-in plant and continuing hiring charges?

Where employers' liability insurance is included this will be suitable to meet your minimum legal requirements and will normally be at least £10m any one claim. If you have a large work force, higher limits are available.

Contractors' all-risk insurance covers contract works, hired-in plant, own plant and tools under one policy.

If you are unsure which level of cover would suit you best it is worth speaking to a specialist adviser.

Things to consider when selecting a contractors' insurance policy

There are a number of factors you will need to consider when it comes to choosing the right level of contractors' insurance cover for you.

It is important to consider the nature of your work when choosing your contractors' insurance policy. High-risk trades such as scaffolding, hot roofing and underpinning can incur higher costs if things go wrong, so may require more forms of cover than low-risk jobs. If the contract work is in hazardous or high-risk locations, then this should also be considered when choosing your policy.

If your job requires you to use your own or hired tools that could be at risk of damage during the work, then standard contractors' cover can be extended to cover them.

Potential contractors' insurance exclusions

You should take time to fully read the terms and conditions applicable to your cover. Take note of what you are required to do for the insurance to apply, and in some circumstances, be aware that in certain processes or locations, there may be activities that are restricted or excluded in entirety. As with any insurance policy, consult your policy wording for the exclusions, or better still, chat through your requirements with a specialist adviser to ensure you are covered for the risks that are important to you.

Contractors insurance from Towergate

For more information, visit our dedicated contractors insurance page or call us on 0344 346 0409 to speak to a specialist adviser.

Contractors all-risk insurance from Towergate

We can offer all-risk cover for contractors:

Our contractors all-risk insurance covers contract works, hired-in plant, own plant and tools under one policy
Contractors' liability cover to suit you, as part of a package or separately
£1-5 million standard public liability cover; can be extended for high-risk contract works

About the author

Mike Stephens is a respected senior industry professional and Fellow of the Chartered Insurance Institute (CII) with well over 40 years’ varied experience in the commercial insurance sector as a director, underwriter, and operational improvement manager.

Mike Stephens FCII