As a UK building company, you are no stranger to risk. Storms, theft, vandalism and fire can all damage a project before it is handed over, and when that happens it is usually the builder who has to pay to put it right. Getting the right builders risk insurance in place means you can focus on delivering good work without one bad night on site wiping out your margin.
This guide explains what builders risk insurance is, how it fits into a wider builders insurance package, what it covers, what it costs, and how to get the right policy for your business.
What Is Builders Risk Insurance?
Builders risk insurance covers physical loss or damage to a building while it is under construction or being refurbished. It typically protects the structure itself, materials on site waiting to be installed, and temporary works such as scaffolding and hoarding.
You will see the term builders risk used a lot online, but it is mainly an American phrase. In the UK, the same cover is usually called contractors all risk insurance (CAR) or contract works insurance. If you want a deeper explanation of how CAR policies work, our guide on what contractors all risk insurance is and its key benefits covers it in full.
Builders Insurance vs Builders Risk Insurance
The two terms sound similar but cover different things:
- Builders risk insurance – covers the works themselves, the physical building you are constructing
- Builders insurance – a broader term for the full package a building company needs, usually including builders risk or contract works cover alongside public liability, employers’ liability and tools cover
Most building companies need both: cover for the project and cover for the liabilities that come with running a business on someone else’s property.
How Builders Risk Insurance Protects Your Business
Under most building contracts, the builder is responsible for the works until practical completion. If a newly built extension is damaged by fire the week before handover, the contract usually requires you to rebuild it, whether or not the fire was your fault.
Builders risk insurance takes that financial exposure away. Typical insured events include fire, storm, flood, escape of water, theft, vandalism and accidental damage.
What Are the Benefits of Builders Risk Insurance?
- Protects the value of the works – if the project is damaged or destroyed, the policy pays to reinstate it, so the loss does not fall on your business
- Covers tools, plant and equipment – policies can be extended to cover your own tools and plant, hired-in plant and employees’ tools on site, which are prime targets for theft
- Meets contract requirements – most clients and main contractors require proof of cover, and standard JCT contracts set out exactly how the works must be insured
- Helps unlock project funding – lenders will usually require builders risk or contract works cover before releasing funds for a scheme
- Keeps cash flow steady – the insurer funds reinstatement, so you are not forced to cover a large unplanned bill from working capital
What Builders Risk Insurance Does Not Cover
Builders risk cover protects the works, not your liability to other people. To protect your workforce and the public, you will also need:
- Employers’ liability insurance, which is a legal requirement if you employ anyone
- Public liability insurance, for injury to third parties or damage to their property
- Professional indemnity insurance, if you carry out any design work
Builders risk policies also exclude wear and tear, the cost of correcting defective workmanship itself, and loss that happened before the policy started. Many building companies bring all of this together in a contractors combined policy.
How Much Does Builders Risk Insurance Cost?
Like most construction insurance, the cost of builders risk or contractors all risk insurance depends on several factors:
- Contract value – the total value of the works being insured is the biggest single factor
- Type of project – new build, refurbishment, timber frame and work to existing structures all carry different levels of risk
- Location and site security – flood risk, crime rates and security measures all affect the premium
- Your experience and claims history – established builders with a clean record usually pay less
- Annual or single project – an annual policy covering all your contracts is usually more cost-effective than insuring each job separately if you run several projects a year
- Excess and extensions – a higher excess reduces the premium, while adding plant, tools or delay cover increases it
Builders can also add cover for specific risks, such as collapse, testing and commissioning or accidental damage to existing structures, depending on the work involved.
Builders risk cover is usually bought alongside liability insurance rather than on its own, so the most useful figure is often the cost of the full builders insurance package. A specialist broker can give you a realistic price for the combination of covers your business needs.
Annual or Single Project Builders Risk Cover?
Builders risk insurance can be arranged in two ways:
- Annual policy – covers every contract you start during the year up to an agreed maximum contract value. This suits building companies with a steady pipeline of jobs.
- Single project policy – covers one build from start to completion, often lasting a few months up to several years. This suits developers and larger one-off schemes, or projects that exceed your annual policy limit.
If you are a developer rather than a builder, our guide to property developers insurance explains how project cover fits with your other insurance needs.
How to Get a Builders Risk Insurance Quote
When you request a quote, the more information you give, the more accurately the policy can be matched to your work. Be ready to share details of:
- The type and value of projects you take on
- Your turnover, wage roll and use of subcontractors
- Site security arrangements
- Any high-risk activities such as heat work, demolition or deep excavation
- Your claims history
It can be tempting to leave details out in the hope of a lower premium, but non-disclosure is one of the most common reasons construction claims are reduced or refused. We have seen builders lose out on claims because their policy did not reflect the work they were actually doing, or because the limits were too low for the project.
Working with a specialist broker avoids this. At Construction Insure, we know the right questions to ask, so you end up with a builders risk policy that responds when you need it, at a competitive price.
Frequently Asked Questions
Is builders risk insurance the same as contractors all risk insurance?
In the UK, yes, for the most part. Builders risk is the more common term in the US, while UK insurers usually call the same cover contractors all risk or contract works insurance.
Who should take out builders risk insurance, the builder or the homeowner?
It depends on the contract. Builders usually insure new works, but for extensions and refurbishments the homeowner’s own buildings insurer may need to be told about the work, and the contract may make the homeowner responsible for insuring the existing structure. Homeowners can check what to look for in our guide on what insurance your builder should have.
Does builders risk insurance cover stolen tools?
It can, if tools and equipment cover is added to the policy. Check the limits carefully, as there is often a single article limit and conditions about how tools are stored overnight.
Protect Your Projects with the Right Builders Insurance
If you are starting a new project and need builders risk or contractors all risk insurance in place, speak to Construction Insure today. We will make sure your projects, tools, equipment and team are properly protected, so a loss on site does not become a loss for your business.