Most construction projects run late. That is not a criticism of the industry, it is one of the most consistently documented facts about it. Supply chain failures, labour shortages, client variations, bad weather, planning delays: the list of things that can push a completion date back is long and familiar to anyone who works on site.
The problem is that your insurance policy does not care about any of that. A fixed-term contract works policy has a completion date written into the schedule, and if your project runs past that date without a formal extension in place, cover can simply cease. You could be working on an uninsured site and not realise it until something goes wrong.
This article covers what happens to your contract works cover when a project overruns, how other parts of your insurance programme can be affected, and what you should do the moment a delay looks likely.
The Scale of the Problem
Project overruns are not an edge case. Research from McKinsey found that 98% of major construction projects experience delays or cost overruns, with an average schedule slippage of 20 months. Globally, around 74% of construction projects run late by some margin.
In the UK specifically, the pressures have intensified. The construction sector lost around 250,000 workers during the pandemic and has not fully recovered. Material prices remain elevated. More than 102,000 construction companies were classified as being in significant financial distress in Q2 2025, a 14% increase year on year. That means a higher-than-usual risk of subcontractor or supplier failure causing downstream delays on your own projects.
None of this is surprising to anyone working in construction. The point is that if overruns are this predictable, your insurance programme needs to be set up to handle them.
How Contract Works Insurance Is Structured
Before looking at what goes wrong, it helps to understand how contractors’ all risk insurance is typically arranged. There are two main formats.
Single-project policies
A single-project policy covers one contract from a stated start date to a stated completion or handover date. This is common for property developers, larger bespoke contracts, and homeowners undertaking significant building works.
The end date is fixed. The policy does not roll over or continue in force because the site is still active. Once the expiry date passes, cover ceases. Any damage, theft or loss after that point falls outside the policy.
Annual floater policies
An annual floater covers all construction contracts underway or commencing during the policy year, up to a stated maximum contract value per project. At renewal, active projects carry over into the new policy year.
Floater policies are less vulnerable to the date-specific lapse risk that single-project policies create. However, they carry a different overrun risk: if projects run late and their values have grown due to variations, rework or rising material costs, the original declared values may no longer be adequate. Underinsurance is just as serious on a floater policy as on any other.
What Happens When a Single-Project Policy Expires
The consequences are straightforward and severe. Once the expiry date passes:
- The insurer has no obligation to pay for any loss or damage to the works
- Any fire, flood, storm damage, theft or accidental damage to the partially completed structure is uninsured
- Materials on site are uninsured
- Temporary works and structures are uninsured
A practical example: a contractor’s single-project CAR policy runs to the end of March. A supply chain failure pushes practical completion to June. In May, an arsonist destroys a significant section of the completed structure. Without an extension in place, there is no cover. The cost of reinstating the lost work falls entirely on the contractor, or on the client, depending on what the contract says.
One misconception worth addressing here: public liability and employers’ liability are separate policies and do not lapse in the same way. A liability policy will continue to respond to third-party injury or property damage claims as long as it is in force. It does not, however, cover the works themselves. Assuming that liability cover fills the gap left by an expired contract works policy is a common and costly mistake.
The Underinsurance Problem
Even where a contractor or developer arranges a timely extension, there is a second issue that often goes unaddressed: the sum insured may no longer reflect the actual value of the project.
Why declared values drift
Construction costs do not stand still. Department for Business and Trade figures showed that construction material prices were around 2% higher in January 2026 than a year earlier, with larger increases in areas such as new housing materials. Add client variations, scope changes and rework to the picture, and the final contract value on a project that has overrun can be significantly higher than the figure originally declared to the insurer.
How underinsurance reduces your claim payment
Most contract works policies are written on the basis that the sum insured represents the full reinstatement value of the works. If it does not, insurers apply the average condition: a proportional reduction in the claim payment that reflects the degree to which the works were underinsured.
In practical terms: if your project is now worth £1.4 million but you are insured for £1 million, a £200,000 flood claim will result in a payment of around £143,000. The £57,000 shortfall comes directly out of your pocket.
When you contact your broker to arrange an extension, also review and update the declared value. The additional premium for a higher sum insured is usually modest. The financial exposure if you do not update it is not.
Other Parts of Your Insurance Programme
Contract works is the most immediate concern when a project overruns, but it is not the only policy affected.
Professional indemnity
If the overrun is caused, at least in part, by a design error, inaccurate specification or negligent professional advice, the client may have grounds to pursue a claim against you. Professional indemnity insurance covers financial losses arising from errors, omissions or negligence in professional services, including advice given during the design and planning stages.
PI policies are claims-made rather than occurrence-based, which means the policy in force at the time the claim is made needs to be active. Contractors providing design services should ensure their PI cover is properly maintained throughout the project and beyond, particularly where there is any dispute about the cause of a delay.
Employers’ and public liability
Both employers’ liability and public liability run as ongoing policies. A longer project simply means a longer period of cumulative exposure. Make sure that wage rolls and subcontractor expenditure are accurately declared at renewal, because underdeclared figures can affect how the insurer responds to a claim during an extended project period.
Structural warranties and performance bonds
For residential new-build projects, a structural warranty runs for ten years from practical completion. If the project overruns and practical completion shifts, the warranty start date shifts with it. Developers relying on lender-approved warranties should keep their provider informed of any revised completion timeline.
Performance bonds, where in place, can be called by the client if a contractor fails to complete by the contractual date. This is a contractual rather than an insurance issue, but a contractor facing a bond call will want to be confident that their professional indemnity and liability covers are in good order.
What To Do the Moment You Foresee an Overrun
The single most important rule: contact your broker before the policy expires, not after. Once cover has lapsed, you cannot backdate a new policy to fill the gap. Any loss during the uninsured period has to be borne directly.
Here is a practical checklist for contractors and developers:
- Identify the risk early. As soon as the programme suggests the project will not complete on time, flag it to your broker. A few weeks’ notice is far better than none.
- Request a formal extension. Most insurers will extend a contract works policy on a pro-rata basis. The additional premium for a short extension is typically modest.
- Review the sum insured. At the same time, check whether the declared value still reflects the full cost of the works, including variations and current material prices.
- Confirm in writing. Make sure you have written confirmation from your insurer or broker that the extension is in place and on what terms.
- Document the reasons for the delay. Supply chain failures, adverse weather, client-instructed variations, record these clearly. This information can be relevant if a claim arises during the extended period.
If you are a property developer with several projects running at once, build regular insurance reviews into your project management routine rather than only addressing cover when a deadline is close.
A Note for Homeowners and Self-Build Clients
Project overruns are not purely a contractor problem. Homeowners undertaking extensions, renovations or self-build projects face exactly the same risk if their policy is written on a single-project basis.
A standard home insurance policy does not cover works in progress. The construction period requires its own specialist cover. If a renovation insurance or self-build policy expires before the project is complete and no extension has been arranged, the homeowner has the same exposure as a contractor: no cover for damage to the partially completed works.
If your build has run past its original completion date, speak to a specialist broker about extending your existing policy. Do not assume your standard home insurer will cover any losses relating to the works. The two covers are distinct.
Keep Your Broker Informed, Before the Deadline, Not After
Project overruns are an occupational reality in UK construction. They do not have to become an insurance crisis as well. The solution is practical and low-cost: maintain regular contact with your broker, act before your policy expires, and review your sum insured every time the project picture changes.
The cost of a policy extension is almost always modest. The cost of an uninsured loss is almost never.
If you are working on a project that is behind schedule and you are not certain your current cover is adequate, get in touch with Construction Insure for a no-obligation review. We have been placing construction insurance for over 40 years and this is exactly the kind of situation we deal with every day.
Frequently Asked Questions
Does my contract-works insurance extend automatically if the project overruns?
No. A single-project policy has a fixed end date written into the schedule. It does not extend automatically. You must contact your broker before that date and formally request an extension. Annual floater policies handle overruns differently but still require accurate values to be declared at renewal.
How far in advance should I contact my broker about an extension?
As soon as you can see that the project is unlikely to complete on time. There is no minimum notice period, but acting early gives your broker time to negotiate terms and gives you time to review your sum insured. Do not leave it until the week the policy is due to expire.
What if the policy has already expired before I realised?
You can arrange new cover going forward, but you cannot backdate a policy to fill a gap. Any loss during the uninsured period would need to be borne directly by the contractor or client. This is precisely why acting before expiry matters.
Will my sum insured keep up with rising material costs during an overrun?
Not automatically. If the project has overrun because of scope changes, variations or rework, and material costs have risen in the meantime, the original sum insured may no longer be adequate. Review and update the declared value whenever you arrange an extension.
Does a project overrun affect my public liability or employers’ liability insurance?
Not in terms of lapsing cover, these are ongoing policies rather than project-specific ones. A longer project does, however, mean a longer period of cumulative exposure. Make sure your declared figures are accurate at renewal to avoid complications if a claim arises.