Contract works insurance explained

If you’re wondering whether you need contract works insurance and the kinds of things it covers, read on for an easy-to-understand definition, plus some claims examples and a brief guide to buying this insurance.

Contract works insurance definition

Contract works insurance is an insurance for builders and other tradesmen, designed to cover work that’s underway on a site. It can pay to repair or redo the work that’s in progress if it’s damaged by an insured event like fire, flood, storm, vandalism or theft.

Do I need contract works insurance?

You should check your client contracts, as you’ll need to take out a contract works insurance policy if your contracts hold you responsible for unfinished work.

The businesses that take out this kind of insurance include building contractors, property developers, electricians, bricklayers, carpenters, plasterers and tilers. However, it can be useful for pretty much anyone who works in the construction industry and needs to insure work in progress.

What does contract works insurance cover?

Contract works insurance covers the work you’re currently doing on a building site.

It can pay for the cost of repairing or redoing the work if it’s damaged or destroyed. As long as you’ve bought the right level of insurance, this can include the cost of the labour, materials and tools to get the work back to the stage it was at before it was damaged.

Examples of contract works insurance claims

You’ve almost completed a house extension when there’s a fire on site and the extension is partially destroyed. Your contract works insurance covers the cost of repairing the work.

Or, you’re building a new commercial property when heavy winds and storms rip off the roof. Your contract works insurance covers the cost of replacing the roof.

What contract works insurance doesn’t cover

Contract works insurance doesn’t cover existing constructions that are on the site. For example, if you’re building an extension and there’s a fire at the property, your contract works insurance could cover the cost of repairing the extension that’s in progress, but not damage to the rest of the house. Your customer’s home insurance should cover this instead.

This insurance will usually cover damage caused by risks like fire, flood, storm vandalism or theft, but it won’t cover damage caused by terrorism, for example. You should check the policy documents for other exclusions.

Buying contract works insurance

It’s important to buy the right level of contract works insurance, so you’re covered if you come to make a claim. To do this, you need to select a cover level that equates to the total cost of your largest project, including labour and materials. This is the case even if your largest project spans over more than one year.

For example, if your biggest contract is a £2 million project to build five houses over 18 months, you need at least £2 million of contract works insurance.

Contract works insurance as part of a tradesman insurance policy

You can build a tailored insurance policy to cover your construction business, including covers like public liability insurance, employers’ liability insurance, tool cover and plant and machinery insurance, as well as contract works insurance. Use Simply Business to find quotes from the country’s leading insurers.

More small business guides for tradespeople

• How to become a self-employed electrician in the UK
• The self-employeed guide to Self Assessment tax returns
• How to build a tailored business insurance quote