All Risks insurance is a term used to describe a collection of insurances designed to mitigate most of the risks you might face on a construction site.
All Risks policies are popular with construction businesses that often take on complicated building projects and want to be covered from any of the many things that could go wrong while work is on-going.
A quality All Risks policy will be built to your needs, so you won’t end up paying for coverage you don’t want or need. As you’re taking all of your coverage out from one provider, insurers are also incentivized to offer discounts and higher protection levels, helping to fill in some of the exclusions you may find if you were taking out insurance from multiple providers.
Typically, you’re likely to see All Risks as a form of Construction Insurance. According to NimbleFins, while there’s no such thing as a standard All Risks Construction insurance policy, you should be on the lookout for the following coverages if they apply to you:
- Public Liability
- Employers’ Liability
- Professional Indemnity
- Contract Works
- Plant and Machinery
- Business Interruption
- Legal Expenses
We’ll cover exactly what each does in this article.
What Does All Risks cover?
All Risks, as the name suggests, is insurance designed to cover nearly every risk that might derail a construction project while in progress. From damages to your tools or building materials to an accident involving a member of the general public, an All Risks policy is a good way to make sure you and your staff can get to work without having to worry about the consequences of something going wrong out of their control.
You’ll often find that larger construction contracts require an All Risk policy before you can begin work, so keep in mind that while All Risks isn’t legally compulsory some employers won’t consider engaging you if you haven’t got a policy for the project. Having held All Risks policies on previous projects can also be a good selling point to potential employers, showing that you’re a careful and risk-averse constructor.
Here’s what a standard All Risks policy might include:
Public Liability will cover you if a third party (e.g., member of the public, client, other business on-site) incurs injury or damage as a result of your business operation. It’ll cover any legal expenses you accrue while defending yourself, and any compensation a court awards against you. It isn’t technically a legal requirement, but almost no customer or client would engage you if you didn’t already hold a policy – it’ll be one of the first things they check.
Employers’ Liability is a legal requirement in the UK for any business that hires staff, whether they’re full-time, part-time or on a contract. It’ll cover your business if your staff member becomes injured or unwell while working for you, and believes your business is at fault. Like Public Liability, it’ll cover any legal expenses and compensation awarded against you.
Contact Works will cover any construction currently underway if it’s damaged in an unavoidable event, such as a fire or flood, or if the site is stolen from or vandalised. It’ll pay to repair/redo any work in progress, limiting the impact of the damage to your end client and helping you to stay on target.
Tools/Equipment/Plant coverage, as the name suggests, will protect any tools, equipment or plant you’re using on a project against theft or damage from flood, fire, etc. It can cover equipment that is both owned or hired-in, so even if your business relies on loaning equipment like cement mixers you’ll know you’re covered no matter what.
Business Interruption insurance is often packaged with Contract Works – it’ll cover any financial losses as a result of work being delayed by covered circumstances outside of your control (often referred to as a Force Majeure, French for “greater force”). If you are unable to carry out business due to a Force Majeure, then Business Interruption will cover any income you may lose as a result.
Non-negligence will protect you if you cause damage to nearby public/private property, but that isn’t a result of a failure on your behalf. This might include the weakening of nearby ground or an increase/decrease in groundwater level.
What is PI insurance Construction?
Professional Indemnity (PI) insurance for construction is designed to protect tradesmen and contractors against claims made by customers who believe their work was negligent. While the definition of negligence can vary, within construction it usually refers to a fault/error in a design or blueprint (poor measurements, incorrect materials), or an incorrect piece of advice given by a contractor to a customer.
PI will cover any legal defence costs and damages awarded as a result of the faults in the design/construction, meaning you won’t be liable to cover the costs of the customer having the work redone.
How much does All Risks Construction insurance cost?
All Risks Construction insurance usually starts from around £500 annually. Keep in mind that every All Risks policy is different, depending on both the coverage you do/don’t need and the different variables insurers use to estimate your risk levels. All Risks insurers will have many important questions for you before you sign-up that will ultimately define the amount you pay – here’s a few of the most important:
- Where your annual turnover comes from (project size, new build vs existing work, residential vs industrial vs commercial)
- Where your annual wage budget goes to (full-time vs part-time, employee vs contractor)
- The size of your largest projects
- Previous claims made