There is a degree of overlap between physical and financial risk insofar as a sub-contractor or passer-by injured as a result of your building work may well then choose to sue you for negligence. However, because the risk to the general public is dealt with quite differently to the risk to people working for you, two separate insurance policies are required in order to cover yourself against both kinds of risk.
Employer’s liability
If you employ any sub-contractors – and you undertake your own project management you are deemed to be an employer as far as insurance is concerned – and any of your sub-contractors has an accident which might be your fault, they can then sue you. If there is a serious accident the sums of money at stake will be large. Most policies now cover you for £10million/ˆ15million. A general builder is required by law to have an Employer’s Liability policy in place and if you, as a client, are using a general contractor then you don’t need your own policy in place as well. But you should check that your contractor has their own insurance in place.
Public Liability
This covers people (or objects) who are not employed by you but who might, nevertheless, still have cause to regret your building site never existed. Maybe the mud from your site led to an accident, maybe your scaffolding fell down on somebody’s car, maybe some kids were playing in your foundation trenches when they collapsed. This is “what if” insurance with a vengeance but though the chances of a claim are small, any such claim could be extraordinarily large. Most standard policies cover you for ?2million/ˆ3million worth of damage.
Contracts Works Insurance
Financial risk can never be entirely covered but there are various catastrophes that you can, to a certain extent, guard yourself from. The basic level of insurance is covered by a Contract Works or All Risks policy. This is used to cover theft of plant and materials from site together with fire or any structural damage to any structures that you may be working on. Your lender will probably insist that you have All Risks cover just as a conventional mortgage lender will insist that buildings insurance is in place on any property they mortgage.
If you are employing a builder to erect your house you shouldn't need to take out your own as well but again you must check to see that they have current All Risks insurance in place and that it’s large enough to cover the value of your complete house – very often the policies stipulate a maximum contract value above which they won’t pay out.
One important point to note is that Contract Works insurance does not cover any existing structures you may be altering, converting or extending. You would be expected to have this covered by a regular insurance buildings policy.
There is another particular problem which occurs with unconverted barns with valuable planning permission riding on the back of them. The nominal value of the structure may be very low indeed but the planning permission depends on the building he original fabric continuing to exist. Were it to burn down before conversion work is started, you could theoretically have planning permission revoked which would be far more expensive than replacing the original fabric. So the risk you are insuring in these cases is not the value of the building but the value of the planning permission. Make sure that your insurance company understands the difference.
Contracts Works and All Risks policies are not mandatory and they usually come with dozens of options for you to pick and choose just which risks you want to cover. These go from the catastrophic (such as the building being destroyed) down to the inconvenient (such as some kid nicking your power tools). Just where you draw the line and just what excess you choose to bear yourself has an enormous impact on the cost of your policy.
There are only a handful of insurance companies active in the insurance market and most of them are now very open to the needs of self-builders as well as the professionals. Quotations for construction projects is a complex area and you would do well to seek out the advice of an insurance broker before parting with cash, but expect to pay around 0.66% of the total project value to get all the cover you really need to build with a safety net. That translates to about ?400-500/ˆ600-750 for a four bedroom detached house. Small builders pay much the same rate on their overall turnover. This would cover you for all the main areas that professionals builders are supposed to cover, being employer’s liability, public liability, and all risks insurance, all summarised above.
If you are self-building, then these policies cease to have any validity once you have completed and so then you need to transfer to regular building and contents policies. There are a number of specialist brokers selling policies to self-builders, most of them advertising in the self-build press. They offer both a fast track, short term policy and a slow and steady build policy.