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 we’ve highlighted throughout this article, contractors all risk insurance is an insurance policy that is designed to cover the needs and requirements of builders and construction professionals within the industry.

With this in mind, if you work in the sector you should always have this type of policy in place. This includes:

• Builders

• Electricians

• Plumbers

• Stone masons

• Labourers

• Carpenters

• And more

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.