03 May 2024
What is Contractors All Risk Insurance?
Insurance plays an important role across the construction industry, protecting both those doing the work and those who are having the work done.
If the worst happens, and a property that is being worked on becomes damaged or an injury occurs on a site, it’s essential that you have the right protections in place to deal with it.
The construction industry has a range of policies and procedures that are exclusive to the sector, and this includes contractors all risk insurance. This type of insurance is one of the most important premiums to have in place as it protects you in a range of circumstances.
With this in mind, it’s essential that you have a thorough understanding of what contractors all risk insurance is and how it can help you. At Contractwise, we’re here to help shed light on this type of insurance.
In this article our team will answer the question ‘what is contractors all risk insurance?’ providing you with all of the information you need to know on the subject.
Read on to learn more.
What is contractors all risk insurance?
Contractors all risk insurance, also commonly referred to as contract works insurance or construction insurance, is a type of non-standard insurance policy that is unique to the construction industry.
It offers coverage for a wide range of things including accidental physical loss, damage and injuries that may occur during the course of a construction project. The insurance provides coverage for contractors and subcontractors who may be working on the project including builders, electricians, plumbers and more. As well as these people, it also protects the owner of the property or development where the work is taking place.
There are two main types of contractors all risk insurance.
The first covers property damage, theft or third-party damage. With this type of insurance, if the property that is being worked on becomes damaged, or even destroyed, during the course of the project, the contractors would be covered for the costs and the client will also not have to pay out again. This policy also covers break-ins and vandalism.
The second part of contractors all risk insurance relates to injury. Construction sites can be dangerous places and sometimes things go wrong. If an injury occurs to a contractor or sub-contractor, having this insurance policy in place gives you peace of mind that the incident is covered and all parties will be properly compensated without any additional money having to come out of your pocket.
Contractors all risk insurance differs to standard insurance policies as it covers ‘all risks’ that could occur. Usually, a normal insurance policy will only cover specific ‘named perils’ that have to be outlined in the contract. There’s no such worry with contractors all risk insurance as every potential liability is considered unless otherwise stated.
What does contractors all risk insurance cover?
In most cases, a contractors all risk insurance policy will cover all equipment, materials and employees that are present on a building site for the entirety of a project. As well as this, the structure that is being worked on will be covered by the policy in addition to any temporary offices or portable building units that may have been installed.
If you prefer, it is possible to get individual policies to cover different areas. For example, you can get contract works insurance for the construction process and the tools, and then get public liability insurance for third-party damages.
However, it is often easier and much more cost-effective to get all of the above combined in one straightforward contractors all risk insurance policy.
Typically, a contractors all risk insurance policy will cover:
Contract works
Public liability
Employers’ liability
Own plant or hired-in plant
Privately owned tools or effects
The above coverage can also be extended to include additional extras such as legal expenses or non-negligence for damage to neighbouring buildings and properties. If you’re a contractor or a devleoper who plans to sell the property after the work has been completed, you may also need to have the appropriate insurance in place yourself as recommended by the buyer’s provider.
What does contractors all risk insurance not cover?
As previously mentioned, having a comprehensive insurance policy such as contractors all risk insurance in place offers excellent peace of mind and will save you significantly if something does go wrong during the course of a construction project.
However, like with all insurance types, there are some exceptions to contractors all risk insurance. Usually, exceptions will be specifically stated in the contract and includes the following exemptions:
Professional indemnity (negligent advice, design or building works)
D&O (directors and officers who have made bad decisions that result in a negative outcome)
Defective workmanship (work that has been poorly carried out by the contractors. This should be covered by a structural warranty instead)
Wear and tear (any wear and tear damage that has been sustained to equipment will not be covered and manufacturer’s warranties should be consulted)
Consequential losses (due to delays, penalty charges, poor performances and problems caused by liquidation)
International projects (contractors all risk insurance can only be taken out for projects taking place here in the UK. If you’re conducting work abroad, you will need to seek insurance in the relevant country)
While a contractors all risk insurance policy will protect you from external circumstances like theft, vandalism, fire and injuries that have occurred during the project as well as the list outlined above, usually the policy will not cover things that are considered force majeure such as natural disasters or the outbreak of war.
Who needs contractors all risk insurance?
As mentioned throughout this article, contractors all risk insurance is designed to cover the needs of all builders and professionals working in the construction industry.
As a specialist policy that protects against the wide range of risks associated with construction projects, a contractors all risk insurance policy offers comprehensive coverage for contractors, subcontractors and all stakeholders involved in a project. This ensures they are financially protected from accidents or damage that may occur on-site and keeps them safe from all legal liabilities.
Let’s take a closer look at who needs contractors all risk insurance.
Contractors
The primary group that must take out contractors all risk insurance is, perhaps unsurprisingly, contactors.
This coverage provides protection for the wide range if risks they face on-site, from property damage to third-party liability claims.
Construction projects involve multiple moving parts and often the use of heavy machinery, which make accidents and damage more likely. For instance, if a builder accidentally damages a neighbouring property or structure during a project or if a construction site has become vandalised, the cost of repairs or legal liability could be substantial. Contractors all risk insurance helps to cover these unexpected losses, ensuring the contractor can continue their work without being financially crippled by events outside of their control.
In many cases, clients will not hire contractors without this insurance in place and it’ll often be stipulated in contracts. This means that not only is the contractor protected, but the client will also be reassured that potential risks are covered, reducing disputes if something does go wrong.
Subcontractors
In addition to contractors, subcontractors are also in need of contractors all risk insurance.
Even though a subcontractor may not be responsible for an entire project in the same way contractors often are, their work can still lead to property damage or liability claims. For example, if an electrician’s work causes a fire or a plumber inadvertently causes a flood, they may be held responsible for the cost of repairs.
With this in mind, if you work as any of the following then it is likely you’ll need contractors all risk insurance:
Builders
Electricians
Plumbers
Stone masons
Labourers
Carpenters
And more
Many main contractors will require the subcontractors they work with to carry their own insurance or to be named on the main contractor’s policy. This ensures that subcontractors are always adequately covered in the case of accidents and damage caused by their work. Even if not explicitly required, it is always in the subcontractor’s best interest to have this insurance in place.
Property developers
Property developers who oversee large-scale projects, such as housing developments or commercial property construction, can also benefit from contractors all risk insurance.
Often, these types of projects will benefit from substantial investments with large amounts of money being spent. This means that any delays, damage or accidents may have major financial setbacks.
In addition to covering physical damage the property has sustained, contractors all risk insurance can also cover third-party claims for bodily injury. For example, if a pedestrian passing by is injured as a result of work being carried out on the site, the policy can cover all legal costs and any compensation that will need to be paid.
Usually, property developers will work with multiple contractors, and contractors all risk insurance offers a central source of protection against various risks. Often, developers will be named as insured parties on a contractor’s policy, giving them additional protection and peace of mind. This also helps ensure that everyone involved in a project has a unified insurance solution, reducing the chance of disputes over who is responsible.
Self-employed tradespeople
Similarly to subcontractors, all self-employed tradespeople, like electricians, roofers, builders, carpenters and more, should have contractors all risk insurance.
This is because working independently comes with its own unique set of risks, as there is no larger company or organisation to fall back on for support if an issue occurs. Contractors all risk insurance ensures that all independent professionals are fully protected against the high costs of repairing damaged work or dealing with third-party liability claims.
Since self-employed tradespeople tend to work on a wide range of different projects, this insurance provides valuable protection on a per-project basis. This coverage is essential, especially when working on high-value jobs where even a small accident could result in significant financial loss. Furthermore, by having a contractors all risk insurance policy it can make you seem more credible and reliable to potential clients who are seeking assurances that the project will be fully covered.
What is plant cover?
You may have noticed that when we outlined what contractors all risk insurance covers, we mentioned plant cover.
But what does this mean?
Well, plant cover refers to certain types of equipment and machinery that are often required during a construction project.
This can include:
Cement mixers
Excavators
Generators
Scaffolding
Access towers
Plant storage containers
And more
These things can be expensive, so if damage occurs to them it’s important that they are protected. Whether you have purchased these things yourself or hired them from an external company, having contractors all risk insurance in place will keep them protected if they become broken or terminally damaged.
Other things that are commonly hired on building sites include expensive machines like dumpers, tracked excavators, mobile cranes, tower cranes and more.
Having contractors all risk insurance in place will keep all of the above protected and mean you will not personally have to pay out for them if the worst happens.
Is contractors all risk insurance the same as public liability?
While they seem similar, contractors all risk insurance is not the same as public liability.
Chiefly, public liability is a type of insurance that is designed to protect construction companies from legal liability if injuries have occurred to third parties like members of the public or customers.
As well as this, public liability will usually cover property damage that have resulted from your business activities.
For instance, if your employees accidentally scratched a wall on your client’s property while moving around the site, this damage would be covered by public liability but not by contractors all risk insurance.
Another example is if a member of the public trips and injures themselves while walking on the site (usually this will only occur if work is being carried out in a public place). Again, these instances will be covered by public liability and legal expenses and fees will also be covered.
With this in mind, you will need to have a public liability policy in place in addition to your existing contractors all risk insurance.
A few examples of where contractors all risk insurance would apply but public liability would not include:
Damage to a project that has been caused by an unexpected issue such as floods, fires or an explosion.
Damage to machinery or equipment that has occurred as a result of an incident at the worksite.
Issues with the piling, demolition and excavation works.
Is contract works insurance the same as contractors all risk insurance?
Due to the similarity in terms, people often confuse contractors all risk insurance with contract works insurance.
However, there is a fundamental difference between the two.
Contract works insurance is taken out by builders, property developers and others involved in construction projects. This insurance policy is meant to cover the cost of repairing or redoing work that has been damaged by certain events like fires, floods, vandalism or theft.
However, unlike contractors all risk insurance, will only cover the project up to the point where the damage occurred. With this in mind, contractors all risk insurance is a far more comprehensive and robust insurance option.
Here at Contractwise, whilst we don’t offer Contractors all risk insurance, our philosophy aims to ensure contractors and subcontractors are protected in all legislative matters relating to the construction industry.
Our speciality lies in CIS payroll and compliance, in which we’re able to advise on, so contact our team today to learn more.