What is Contractors All Risks insurance?

carpenter, plumber and builder Contractors All Risks insurance, at it’s most basic, covers the works in progress on a construction site for almost any peril or loss, such as fire, explosion, flood, storm, accidental damage, vandalism and theft. For example, if a contractor is refurbishing a house, a CONTRACTORS ALL RISKS policy will insure the new works and the materials and fittings.

A Contractors All Risks insurance policy can also be extended to include:

What isn't covered? Insurance professionals aim to give the best advice we can – and this includes telling you what you are NOT insured for. A stand-alone Contractors All Risks policy will not normally include public and employer’s insurance or any existing buildings. Naturally, Contractors All Risk insurance policies vary between insurance companies so make you sure you compare the cover offered between them and not just pick the cheapest one!

If you already have public and employer's liability insurance (or are planning to buy public and employer's liability insurance), Contractors All Risks insurance is often an optional extra and may be the cheapest option for small contractors that do not require high limits of cover.

Who buys Contractors All Risks insurance?

How is your quotation worked out? A Contractors All Risks insurance premium is sometimes based on the number of manual workers (employees and labour only subcontractors) that work in your business, and sometimes on your contracting turnover. You also need to decide what limit of cover that you require. The limit of indemnity must cover the biggest contract that you undertake regardless as to how long it will take to complete. As an example, if you may have a contract to build 10 houses at a total cost of £1,500,000 over a period of 2 years. In this example you will need a £1,500,000 limit of indemnity. However if your biggest contract is £50,000, but even if you undertake one of these every other week, you will only require £50,000 limit of indemnity.

Be careful that you insure the whole contract. Recently, we had a client who was insured for £1,000,000. However, they had taken over a £2,000,000 contract from a building contractor that had gone bankrupt and there was just £250,000 of work to be completed. As our client “owned” a £2 million contract, he needed to have a limit of indemnity for £2 million. The reason for this is had the entire works burnt down, they would have been responsible for rebuilding the entire building, including what had been already completed by the collapsed builder.

Our client was not happy to pay the substantial additional premium for this increase in cover, but they would have been less happy had they suddenly found themselves short of a million pounds in the event that the site been totally destroyed!

Is there anything else should you consider? As with all insurance policies, you must read the “key facts” (sometimes called the summary of cover). Will this fulfill your needs? Do you have temporary buildings such as portable toilets or a site office? If you hire plant in, do you need to insure them? If you do, ask the hiring company what their costs are and compare their charges against the Contractors All Risks insurance quotation. Additionally, check what the security conditions are. It is almost certain that the entire site will need to be fenced and securely locked. Also, check the excess – this can be very high (I have seen £5,000) and can be different for, say a theft claim, compared to a fire claim.

Finally, when does the insurance finish for the works? A typical Contractors All Risks insurance policy will also include a “maintenance period” clause. This will cover a building which has been completed by the contractor but awaiting a buyer and can be as short a period of 30 days, or, ideally, much longer. However, don’t forget to renew your policy if it is due for renewal before your contract is completed or the buildings are not yet sold!