Builders’ insurance can cover lots of different risks faced by anyone running a construction business, including legal costs and stolen tools. One type of specialist insurance for builders that always raises lots of questions is builders’ indemnity insurance. To help make it clearer, we explain everything you need to know in our complete guide below.
Firstly, what is builders’ indemnity insurance?
Builders’ indemnity insurance is a type of insurance that will pay out if a claim for compensation is made against you for professional negligence. It’s also sometimes called errors and omissions insurance.
Why do builders need indemnity insurance?
As a builder, you’re providing your clients with advice as well as the service of actually building something. The advice you give could be anything – from where to put a skylight in an extension to what materials to use. If you accidentally make a mistake, your advice could lead to a financial loss for your client or, even worse, injury or death. If that happens, you can be sued for negligence, and the legal fees and compensation can quickly stack up.
What’s the difference between builders’ indemnity insurance and public liability insurance?
Builders’ indemnity insurance is designed to protect your business financially if a claim for compensation is made against you. It’s similar to public liability insurance for builders in the sense that it protects you from the costs of defending a claim.
With public liability insurance, you’re covered if your client, supplier, or a member of the public suffers any injury or damage to possessions because of something you’ve done or failed to do. For example, someone trips over tools that have been left on the ground with no warning notice. Or you drop something from a ladder and it falls, causing an injury or damage to property.
With builder’s indemnity insurance, your legal costs are covered if a customer makes a claim against you because of the professional advice you have given or errors or omissions in the designs or specifications you’ve provided. Typically it’s a financial loss as a result of an error or omission that is covered. But it can also include injury or loss of possessions, for example, an incorrect calculation result in a structure failing and causing injury or damage.
What does builders’ indemnity insurance cover?
If someone makes a claim against you for professional negligence, you can relax knowing that your builders’ indemnity insurance will cover:
- The legal costs to defend your case.
- Any compensation awarded.
- The costs associated with having to put right any mistake.
Another significant benefit of builders’ indemnity insurance is that your insurance company will have an expert team that will be able to handle the claim for you. That’s one less thing to worry about.
I don’t charge clients for professional advice. Do I still need builders’ indemnity insurance?
Negligence can be a very complicated legal area. Even if you don’t charge separately for the advice part of your work, you can still be sued for professional negligence.
Does it cover claims of shoddy workmanship?
Builders’ indemnity insurance will not usually pay out to defend claims against you for poor workmanship. The best thing to do is to speak to your insurance broker to find out precisely what is covered.
Do I have to have builders’ indemnity insurance?
No, the only insurance that you must have by law is employer’s liability insurance if you have any members of staff. You’re not legally obliged to have any other type of insurance, although failing to have insurance can leave you at significant financial risk.
What level of professional indemnity insurance do I need?
The level of cover will vary depending on the size of your business and the sort of work you carry out, which can alter the potential scale of compensation that could be awarded. In most cases, cover somewhere between £1 million – £10 million should be enough for most businesses.
- If you work with very specialist clients, buildings, or materials and the costs to put work right and pay compensation are likely to be higher, speak to your insurance broker for advice.
- Public sector organisations often set a minimum level they expect to be covered by indemnity insurance. If you tender for work, check what is needed.
- If your business is smaller, make sure you’re not paying extra for a very high indemnity insurance limit.
Other essential insurance for builders
Buying your builders’ insurance as a bundle deal can save money. But not every builder will always need every type of insurance. Look out for tailor-made packages so you can be sure you’re not paying for anything you don’t need.
- Public liability insurance for builders
- Employers liability insurance
- Tools insurance
- Van insurance
How to save money on builder’s insurance
Saving money on insurance can help to increase the cash in your pocket. But skimping on coverage is likely to cost you more in the long run. Instead, here are our top tips to get a better deal on cheap builders’ insurance:
- First, pay annually.
- Next, increase the excesses. This can lower premiums, although don’t raise them too high or making a claim could become unaffordable.
- Thirdly, stay claim free. Locking up tools and taking a strict approach to health and safety can help you to stay claim free. And your no-claims bonus will help to keep premiums down.
- Next, use a specialist insurer. Insurance is all about risk. An insurance company that specialises in covering builders will understand the real risks faced by the trade and will generally offer the lowest premiums.
- Finally, always shop around. This is the last but most important way to keep insurance costs down. Never settle for your renewal quote. Instead, ring as many insurance companies as you can or get Park Insurance to do the legwork for you.
Peace of mind with builders’ insurance from Park insurance
Park Insurance has been helping builders to find the best value for money insurance for nearly 30 years. Our friendly team understands your unique needs, and we make finding the right insurance easy. When you buy your builders’ insurance through us, you can ask questions and be 100% sure of what you’re buying. If you do need to make a claim, we’ll take control leaving you free to concentrate on your job. Call us on 0117 9556835 or get in touch for a free quote.