Contractors All Risks insurance feature image

Contractors all risks insurance explained

Posted on 30th June 2022 by Phil Ainley

As a trades professional you’ll need to carry public liability insurance (PL) as a minimum, to protect you in case something goes wrong with a customer’s job, such as damage to the customer’s property or even an accident to a third party.

But what about contractors all risks insurance? What is it and how could you and your trades business benefit from holding this type of cover?

What is contractors all risks insurance?

Contractors all risks insurance is a business policy that is designed specifically to provide comprehensive cover to tradespeople, builders and construction professionals, while also providing cover for the building works, the tools and the plant equipment on a building site.

What does contractors all risks insurance cover?

This type of cover – sometimes referred to as contract works insurance – is essentially an enhanced type of public liability insurance specific to on-site work. The policy offers cover for repairs or for redoing work that’s already underway but that goes so wrong that it has to be scrapped and possibly even restarted.

This could include damage caused by the tradesperson doing the work, theft or vandalism, or events such as flood damage, storm damage or fire damage.

The policy can provide cover for temporary site buildings, architects drawings and even show home contents.

Some examples of how the policy can help include:

A fire damages your site office temporary building, destroying architect’s drawings in the process.
Your construction site is broken into and essential tools and equipment are stolen.
A contractor mislays tools or equipment that are vital to the completion of the building project by the agreed deadline, resulting in a potentially costly delay.
Accidental damage is caused to the contents of the show home on the site.

Why is contractors all risks insurance important?

The construction industry is beset with risks, the most common of which includes theft or vandalism or damage to the equipment, tools and the building materials. A 2020 study stated that the construction industry is blighted by an estimated £800 million of theft each year. In a survey by The Chartered Institute of Building’s (CIOB), they discovered that 92% of respondents said they had been affected by theft, with 21% reporting weekly thefts from construction sites.

Before you undertake any work you would be best advised to check with your client or main contractor exactly what level of business insurance you need for the job.

Contractors all risks insurance is important if the contract holds you directly responsible for any unfinished work. The policy would respond to provide cover for you should something go wrong, potentially saving you the outlay for any compensation that you would otherwise have to pay for out of your own pocket.

Whilst this type of cover is not mandatory, it can help to soften the financial blow of any unexpected theft or damage. The contractors all risks policy will typically cover your own plant, tools and equipment, as well as hired-in plant machinery and equipment, so if any of these essential tools were damaged while on site, you could claim the costs to replace them.

What isn’t covered by contractors all risks insurance?

It’s important to be aware of what you’re covered for and what is not covered by thoroughly reading your policy document. A key example relates to existing site structures. If a problem arises with this structure, your contractors all risks insurance won’t cover it as it isn’t an ‘in progress build’, the structure was already on site.

For other aspects of the cover that you might be unsure about, it is important to speak to your insurance provider for clarification.

Other types of insurance tradespeople may wish to consider include:

Goods In Transit cover – This type of cover is usually available as an extra on a tradesman insurance policy. The policy will cover property against loss or damage while the goods are in transit from one place to another. This insurance can be taken out for goods distributed in your own vehicle or by a third-party carrier.

Goods in transit cover will provide cover for:

Theft whilst in transit
Damage caused by an accident during transit
Loss during transit
Damage caused during transit.

Professional Indemnity insurance (PI) – Will provide cover for legal costs should a client pursue a claim against you for negligent work and/or negligent advice.
Employers’ Liability insurance (EL) – A minimum of £5million of cover is required by law if you employ staff.
Occupational Personal Accident insurance – A vital form of cover to protect yourself should you sustain an injury or illness as a result of the work you do. The policy can be extended to cover your employees.

Who needs to hold contractors all risks insurance?

Contractors all risks insurance is typically carried by professional tradespeople who work on building sites, such as:

General building contractors
Electrical contractors
Plumbers
Plasterers
Tilers
Carpenters and Joiners
Bricklayers
Glazing installers
Heating engineers

What kind of excess can you expect?

The excess is the amount you pay towards a claim you make on your insurance policy. For example, if you make a claim for £1,000 for stolen tools and your excess is £200, then your payout will be £800.

Insurance policy	Lowest excess	Highest excess
Public liability insurance	£250	£250
Employers’ liability insurance	£0	£0
Tools & trade materials cover (can only be purchased with the public liability policy)	£250	£250
Personal accident insurance	£0	£0
Professional indemnity insurance	£250	£500