Guest Expert: Everything You Need to Know About Insuring Your Building Project
Jon Summers is Managing Director at Wisemans Insurance Service Ltd., an insurance brokering company specialising in the construction industry. With over 30 years experience, he’s a leading expert on creating bespoke cover for building projects.
Why ordinary home insurance is useless during a construction project
You probably already have home insurance in place if you’re going to work on an existing house, but this immediately becomes useless the moment building works start.
Home insurers become nervous about covering an existing structure when significant works are being done to it. Most have an automatic exclusion when construction works are carried out or if it is left unoccupied for more than 30 days.
Homeowners unaware of this exclusion can find themselves without insurance for the structure when they undergo a renovation or extension, or end up paying twice for building insurance on top of their now-useless home insurance.
What we typically source for our clients is a package where a single insurer covers both the value of the existing structure and the contract works, creating a seamless transition with no gaps in between.
What insurance do you need to cover your building project?
There are at least five standard types of insurance which need to be in place before works commence, and are all agreed beforehand in the project contract.
- Employer’s liability insurance: This is the insurance purchased by contractors working on the project covering them for compensation if an employee becomes ill or injured as a result of working on site. All employers are legally obligated to carry this insurance.
- Public liability insurance: If a third party or member of the public is injured or suffers damages to their possessions or property, this insurance covers compensation they might seek. For example, if building materials fall from the scaffolding and land on a nearby car.
- Contract works insurance: Another insurance taken out by the contractor, which covers the works in progress to help pay for damage from vandalism, fire, flood, theft, et cetera. We make sure there are no exclusions which would leave the contractor unable to claim.
- Completion/performance bonds: These bonds are issued by the bank financing the works or underwritten by the insurance provider. They ensure that the building contract is completed in the event that the original contractor is unable to continue working on the project if, for example, they go out of business halfway through.
- Non-negligent cover: Cover taken out by the contractor which protects the homeowner from claims against damage to neighbouring properties as a result of the building works.
All the above will usually be required by the lenders providing your development loan before they will agree to finance your project.
Don’t forget to resume home insurance after completion
After the Practical Completion Certificate has been issued (the legal document stating that works are complete and the structure is safe), liability is transferred from the contractor back to the homeowner, who must then have home insurance in place.
We can prepare this home insurance for you in advance so that there are no gaps between the contractor’s liability ending and your home insurance starting. You might get a good deal if you use the same insurer who provided cover during construction.
High street insurers are just the tip of the iceberg
Insurance brokers have access to a huge market of insurers that aren’t household names. Experienced brokers (such as us) even have exclusive access to insurers which aren’t available to any other brokers.
You can’t just call up a high street insurer if you have a substantial construction project. They won’t touch a lot of the hotter projects that we specialise in as there’s simply more risk than they’re comfortable with.
To get complete cover at a fair rate you need to be able to shop around and negotiate prices with insurers most people don’t know exist, which is exactly what insurance brokers do.
Our fees are usually entirely covered by commission we receive from the insurers, so most of the time our fees will be invisible to you – or we might save you money thanks to being able to negotiate reduced rates.
What are other benefits of using an insurance broker?
Every construction project is different, from the value of the initial structure to the value of the works and the number of contractors working on it.
This means there is no homogenous solution for insurance, and it’s easy for building projects to end up with gaps in their cover which can cost the contractor or the homeowner dearly.
Our role is to closely inspect the project and make sure every aspect of it is covered so no parties involved are exposed to unnecessary risk. This may involve multiple insurers and negotiations for bespoke cover.
We also stay with a project until completion to provide cover should the works or the parties involved change. For example, the main contractor might contact us to ensure a subcontractor has the appropriate liability insurance in place before they can start work on site.
Contact Wisemans Insurance Services to learn more
If you have any questions about insurance for your building project – whether it’s a simple extension or an ambitious new build – feel free to get in touch with us by calling 01784 242 138.