Building works - take ownership

While contractors are typically required to carry insurance to protect themselves and their business, their policy may not extend cover adequately to protect you as the homeowner. We know from experience that contractors are often quick to tell clients that they are ‘fully insured’ and ‘you don’t need to worry about anything’. Regrettably, this is not always the case.

Contractors' insurance policies are primarily designed to safeguard the contractor's interests, focusing on liabilities specific to their own business operations. This does not necessarily mean that the coverage fully addresses all the potential risks to the homeowner associated with a building project, leaving you potentially exposed to financial liability if there is damage or unforeseen consequences for the existing structure. Also of course, if the contractor leaves the job for some reason before the contract is completed, they take the policy with them and can leave you uninsured. Replacing cover midterm is not always possible.

If you rely on your contractor's insurance policy and it has limitations, exclusions, or gaps in cover, you may find yourself facing unexpected costs which are not adequately addressed by it. In the event of subsequent disputes or issues, navigating the claims process can be complex and time-consuming as the insurer will be dealing with the contractor as its client and not you. This can lead to delay in resolution with all the potential for stress and financial cost. Always check the contract at the outset as this should make clear the insurance responsibilities. It usually recommends that when there is an alteration to an existing structure, the client (homeowner) should insure the works and it is our advice that they should do so.

Before starting a building project, it is most important to advise your household insurer and the Statement of Fact which accompanies each renewal will specifically ask you to confirm whether you intend to carry out any works in the ensuing 12 months. Subject to prior notification, some of the high-net-worth insurers will provide an element of Contractor’s All Risk cover (CAR) within their household policies but only up to a specified amount. This limit varies from policy to policy and if it is not for a sufficient value for the planned works, it is advisable to secure your own CAR policy. This will provide tailored ‘All Risk’ coverage for both the existing structure and the contract work itself and will ensure that you have the necessary protection in place throughout the construction process.

By taking ownership of the contract and controlling your own insurance cover, you can have far more peace of mind and confidence in the event of a problem.