Construction Insurance
Construction is a high-risk industry. Whether you are undertaking work at depth, at height, with heat, using heavy machinery or working in a hazardous environment. Protecting your business and your projects is essential. That’s where construction insurance comes in.
Quick Summary
- Protects the contract works and everyone on site: A construction insurance programme combines contract works (contractors all risks), public liability, and employers’ liability into a single, coordinated policy.
- Annual or single-project policies available: Contractors with an ongoing pipeline benefit from an annual programme; developers and one-off builders can arrange project-specific cover instead.
- JCT and NEC contracts often mandate specific cover levels: Most standard building contracts specify minimum insurance requirements. We check your contract terms and ensure your policy meets them.
- Specialist extensions matter: Non-negligent liability (Clause 21.2.1 / Section 6.5.1), latent defects, and contract price uplift are often excluded from standard policies. We make sure you have them.
What is Construction Insurance?
Construction Insurance is a flexible programme of covers designed to protect contractors, developers, and project owners against the wide range of risks that arise during building work. At its core, it combines contract works insurance (covering the physical works under construction) with the liability covers required to operate lawfully and meet contractual obligations. However, a well-structured construction programme extends well beyond those basics — covering plant and equipment, professional liability, and the complex third-party risks unique to the construction environment. Unlike a standard commercial package, construction insurance must reflect the specific nature and value of each project, the contractual obligations placed on the insured, and the trades involved. Consequently, it is one of the most individually tailored commercial insurance products, and the difference between a comprehensive programme and a deficient one is rarely apparent until a claim arises.
What Does a Construction Insurance Programme Cover?
A construction programme can be structured as an annual contractors policy or a single-project policy. In both cases, the core covers and key extensions are similar. The table below outlines the principal sections and what they protect.
| Cover Section | What It Protects | Daines Kapp Advice |
|---|---|---|
| Contract Works (CAR) | Physical loss or damage to the works under construction — including materials on site, in transit, and temporarily off site — from fire, flood, storm, theft, vandalism, and accidental damage. | We ensure the sum insured includes a contract price uplift and covers the full reinstatement value, not just the contract sum. |
| Public Liability | Third-party bodily injury and property damage claims arising from your construction activities — including damage to adjacent properties, underground services, and members of the public. | Most principal contracts require £5m or £10m. We check your contract requirements and set the limit accordingly. |
| Employers’ Liability | Claims from employees and labour-only subcontractors who are injured or become ill as a result of their work on site. | Legally required at a minimum of £5m. We confirm labour-only subcontractors are correctly classified and covered. |
| Plant & Equipment | Loss or damage to owned, hired-in, and leased plant — including excavators, cranes, scaffolding, and powered hand tools — on site and in transit. | We check that hired-in plant is covered and that the definition of plant aligns with what you actually use on site. |
| Non-Negligent Liability | Third-party claims for damage to property adjacent to the works that arise even where you have not been negligent — for example, subsidence or vibration damage to a neighbouring building. | Required under JCT Clause 6.5.1 (formerly 21.2.1) and NEC equivalents. Often excluded from standard policies — we arrange it as a specific extension. |
Annual Contractors Policy vs Single-Project Cover
Contractors who carry out building work continuously throughout the year — whether residential refurbishment, commercial fit-out, or groundworks — typically benefit from an annual contractors all risks and liability programme. This provides a rolling policy that covers all contracts within defined parameters (maximum contract value, trade activities, geographic scope) without the need to arrange separate cover for each project. However, developers, housing associations, and occasional builders are better served by a single-project policy, arranged specifically for one scheme. Single-project cover can be structured to reflect the exact contract value, programme duration, and contractual obligations of a particular development, and it can be placed in the name of the employer, the main contractor, or jointly. Furthermore, banks and funders increasingly require project-specific cover as a condition of construction finance.
JCT and NEC Contract Requirements
Most standard form building contracts — JCT, NEC, and their variants — impose specific insurance obligations on the contracting parties. These typically include minimum public liability limits, the requirement for contract works cover in joint names, and in some projects, the requirement for non-negligent liability cover (JCT Clause 6.5.1 / NEC Option X18). Failure to hold the correct cover is a breach of contract and can invalidate an indemnity or result in a claim being rejected by the insurer. Non-negligent liability can also be arranged as a standalone cover where a contract requires it but no broader programme is in place. We review the insurance schedule of your standard contracts and ensure your programme complies. Furthermore, where a client or employer’s requirements go beyond standard market terms, we negotiate the appropriate extensions with specialist insurers before the contract is signed.
Why Choose Daines Kapp for Construction Insurance?
Construction insurance requires a broker who understands the technical demands of the sector. Policy wordings that appear similar can differ significantly in how they respond to common construction claims — subsidence, water ingress, design errors, and delayed completion. As an independent broker, we have access to specialist construction markets, including Lloyd’s of London syndicates, that provide the depth of cover the sector requires. Furthermore, we work with you throughout the project life cycle: at tender, at contract execution, and when a claim arises on site.
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Frequently Asked Questions About Construction Insurance
What is the difference between contract works insurance and public liability?
Contract works insurance (also called contractors all risks or CAR) covers physical loss or damage to the building or structure under construction — the materials, the partially completed works, and temporary structures. Public liability covers claims made by third parties who are injured or suffer property damage as a result of your activities on site. Both covers are needed: contract works protects your own financial exposure if the works are damaged; public liability protects you against claims from others. Consequently, the two are almost always arranged together as part of a construction programme.
Do subcontractors need their own construction insurance?
Yes, in most cases. Bona fide subcontractors — those who supply their own labour, plant, and materials — are generally required under the main contract to hold their own public liability and employers’ liability insurance. The main contractor’s policy typically does not extend to cover subcontractors’ independent liabilities. Labour-only subcontractors, however, are usually treated as employees for insurance purposes and should be covered under the main contractor’s employers’ liability policy. We advise on how to correctly classify and cover your supply chain.
What is non-negligent liability (JCT Clause 6.5.1) and do I need it?
Non-negligent liability cover (required by JCT Clause 6.5.1 and the equivalent NEC provision) protects against third-party claims for damage to adjacent properties that arise from the inherent nature of the works — even where no negligence can be proven. For example, vibration from piling, settlement from excavation, or the removal of support from a neighbouring building can cause damage to adjacent structures for which the contractor or developer may be legally liable even if all reasonable precautions were taken. Standard public liability policies exclude such claims, so a specific non-negligent liability extension is required wherever the contract demands it — or wherever the construction works pose a risk to neighbouring properties.
How is the contract works sum insured calculated?
The contract works sum insured should reflect the full reinstatement cost of the works at completion — including materials, labour, and professional fees. It is not simply the contract price, as the cost to rebuild may exceed the original contract value (for example, if materials costs have risen or if demolition of damaged works is needed before reinstatement). Furthermore, most policies require a contract price uplift — typically 10% to 15% — to allow for cost increases during the contract period. We review the sum insured at inception and advise on the appropriate uplift to avoid underinsurance.
Does construction insurance cover design liability?
Standard contract works and public liability policies cover physical damage and third-party injury claims, but they do not cover losses arising purely from design errors. Design liability — for example, a structural engineer’s specification error that requires the works to be rebuilt — falls under Professional Indemnity Insurance. Contractors who take on design responsibilities (under a design-and-build contract, for example) should therefore hold a contractor’s professional indemnity policy as well as their CAR and liability programme. We can arrange both covers as a coordinated package.
Can a developer arrange construction insurance instead of the contractor?
Yes. Under many development contracts and JCT design-and-build forms, the employer (developer) has the option to arrange and maintain the contract works insurance rather than leaving it to the main contractor. Developer-arranged insurance (sometimes called an Owner Controlled Insurance Programme or OCIP) provides a single, coordinated policy covering all parties with an interest in the works — including the main contractor, subcontractors, and the funder. This eliminates the risk of gaps between separate policies and gives the developer direct control over the cover. We structure developer-arranged programmes for residential and commercial development schemes of all sizes.
