Are contractors and developers up against it to get the right property developers insurance in place? In order to protect their businesses and their clients properties. Many of the companies offering insurance unfortunately have very little knowledge about contractors combined insurance, contract works insurance or contractors all risk insurance.
So, the answer to this is an outright Yes!
Why Cheap Property Developers Insurance Costs More
Why though? In an ideal world, this wouldn’t even be a consideration, but in a world of sell sell sell sell /cheap cheap cheap property developers can find themselves with low insurance quotes that simply don’t give adequate cover.
Even though we are in a market governed by a financial body there are still a whole host of companies who are still miss-leading clients and not educating them on their policies. Some insurers are selling property insurance products that they have little knowledge of, or it is left in the hand of computers to provide a question set without any explanation as to what you actually need.
Sell Sell Sell … Cheap Cheap Cheap is the perfect equation for providing cover for which insurance companies simply do not pay out.
Let’s look at both sides and break it down and see where property developer’s insurance can go wrong.
We have 3 categories here: Comparison sites / brokers and large insurers/brokers who sell directly with large advertising budgets and independent specialist construction insurance companies. In this article we will look at the two categories you should avoid.
Comparison Insurance Sites
Let us start with comparison sites and the draw that contractors and property developers have into going down that path and placing their insurance in this manner. A comparison site will feed you a set list of questions, you will answer the questions you understand and kind of ignore the ones you do not.
The standard contractor will go online and think that all they need is public liability insurance or public and employer’s liability insurance. That is fine, nothing wrong with that, as that is all you think you need. Unfortunately, this is not good enough as you do not have someone to speak to you about your business activities and analyse exactly what would be appropriate to cover your business.
Do you have any permanent manual employees? (This does not include partners or directors)
This is a great question and one which the majority get wrong and also one which a whole host of companies will try and serve as they feel the more people the disclose the more expensive the premium will be. Well, that’s 100 % accurate and also if not disclosed the insurers once they go through the claimant’s books and realise there is a discrepancy, they are 100 % within their rights to void the policy.
So What Needs to be Disclosed?
An employee is an individual who works part-time or full-time under a contract of employment and they work for you for more than 50 days per year. There is also the instance where a boanfide subcontractor can be deemed as an employee. For instance, if you recruit say a plumber to come in and do work for you and they are working under your instruction then they are an employee. To go further on this if they are wearing one of your company shirts driving one of your vehicles, they are 100 % your employee.
You can answer ‘No’ here if you only employ temporary or casual workers on a short-term basis (where they’re working less than 50 days a year), but you have to be clear exactly what category employees fall into and without comprehensive conversation its extremely difficult to understand this.
Therefore, if you are looking for property developers insurance or a contractor of any sort, you must realise how important it is to get these details down as accurately as possible.
CIS (Construction Industry Scheme)
Many companies now use CIS workers (CIS stands for Construction Industry Scheme, which is an initiative brought in by HMRC to minimise tax evasion in the construction industry and protect construction workers from false employment. It’s been around since 1971, and basically instructs contractors to deduct 20% from their subcontractors pay to cover tax and national insurance contributions.)
Again, what many property developers and contractors think is that a CIS is not their employee, but they are a labour only sub-contractor or a bonafide subcontractor. This again is dangerous and totally wrong. As per above the only reason why they are a CIS is due to tax purposes, this doesn’t mean that the majority of the time they don’t work for you or are under your instruction because they are.
100% they would not be insured as a bonafide sub contractor, as this would mean they carry their own insurance, but even if they did and they were working under your instruction they would still be deemed as an employee.
As you can see this is complex and not easy to figure out and this is not something a comparison site or a non-specialist will grasp, which again highlights the risk of taking that approach!
Contractors All Risk Insurance
What does this cover?
- situations where your work on a site is destroyed or damaged while you’re contracted to work on a job
- the cost of labour, materials, and tools
- gets you back to where you were just before the damage happened
Contract works insurance protects you if your contract with a client makes you responsible for any damage to your partly completed work.
That our eyes get blinkered and we just carry on subconsciously knowing that we are running a risk.
Non-Specialist Property Developers Insurance Providers
All a non-specialist will care about is getting a policy over the line for a sale. They have minimal industry knowledge and will give you zero explanation on what you should or should not have to protect you. The most common mistake a non-specialist makes is their inability to read a document and decipher cover and relay this to the client. No care or thought is taken as all it is to them is a sale.
Most of these companies if you asked them about speculative build insurance / contractors all risk insurance and contract works insurance will not have a clue and if they do know what you are referring to again its rare they can give you an explanation to the cover.
This is not a good sign and the scary thing is, is that if you don’t know what to ask for they would be looking out for this cover either or any of the caveats that come with the majority of portal policies they will try and sell you.
So yes cheap is always great, but like with any product you buy for cheap, it soon comes undone and then you spend your time wishing you had spent the money on the better more efficient product that is fit for your purpose.
Hopefully by now it has become apparent that if you are looking for property developers insurance that it is always best to go to an independent specialist to discuss your requirements.