Planning the Construction Insurance your business needs
Building sites are full of potential hazards, such as trips and falls, power tools and heavy plant. Because of these risks, having the right insurance in place is essential.
Working with a specialist construction insurance broker that understands your business, your approach to risk and the way construction projects are managed will help make sure you get the right level of insurance cover for the right price, for your individual business.
We have worked with customers in the building and construction trade for many years. Here are some of the things we advise our clients to think about when planning their Public Liability, Employers’ Liability and other essential construction insurance.
Be as clear as you can about the nature of your business
‘Construction’ is a broad term covering a wide range of trades. Make sure you list everything your business does clearly, so insurance providers know the kind of work you undertake. That way, you avoid your construction insurance policy being loaded to include high-risk services you do not offer, like demolition or tunnel work. More importantly, you don’t want to be undertaking works which aren’t listed in your business description as this may invalidate your insurance and put your entire business at risk.
Know where you stand with other contractors
It is always important to know how you are going to be working with others on-site, the make-up of your crew (the bona-fide subcontractor and labour only split) and who is responsible for which elements of the project, so insurers can work out your construction insurance requirements accurately.
Your insurer will only cover you for your responsibilities. If a Bona Fide Sub-Contractor does something wrong or makes a mistake that results in a claim, and they do not have the appropriate cover, your insurance company may not cover you. It is your responsibility to check that your BFSCs have the appropriate levels of cover in place. This might include insisting on specific cover levels that match your own policies so that are no disparities or gaps, which may invalidate your own insurance and result in the cost of a claim being set against you.
Labour-only, or ‘Cards-in’ workers, are counted as temporary employees of your company and must be included in your overall employee headcount for insurance purposes.
Think of the worst that could happen
As well as being clear about what work you do, be as precise as you can in describing the scope of any projects you need construction insurance cover for.
For example, you might be building an extension with a total project value of £55,000. But if a mistake causes structural damage or a fire that spreads to the rest of the house, any claim on your residential construction insurance policy could be for much more. Always consider the ‘worst case scenario’ when working out how much cover you need from your contractors’ insurance.
Understand the risks your construction insurance has to cover you against
There is construction insurance you have to have by law and construction insurance that it is advisable to have to limit your exposure to risk.
How much or how little risk you take on is ultimately your decision, but not one you should make without taking expert advice.
We are a highly experienced assessor of risk in the construction industry. We offer informed guidance to help you understand the risks specific to your business. Our approach to insurance is to provide you with a menu of choice. Whereby you select the specific covers and protections your individual business needs (with advice and assistance from our experts of course.) Resulting in truly bespoke cover, reflective of your appetite to risk and the specific of your business model.
Plan for the future to keep your construction insurance up to date
Be aware that risk grows as your business grows. The higher the value of each project and the more people you employ, the greater the risks involved and the more construction insurance cover you will need.
We will help you review your contractors’ insurance requirements regularly to make sure you are still adequately covered. We will also tell you about developments in industry law that could affect your insurance arrangements.
For example, changes in 2017 to the ‘Ogden Rate’ – an estimated lifetime interest rate on a lump sum used to calculate compensation – means companies providing construction insurance cover now have to pay a larger figure up front so victims of workplace accidents can afford the care they need plus any additional costs.
If a life-changing accident occurred on your site and you were at fault. The sum paid to the claimant is now significantly larger than pre-2017. This is because the interest figure used when working out the overall all lifelong amount a claimant is to be rewarded was reduced from 2.5% to -0.75%. Although the Ogden Discount Rate changed again in July 2019 to -.025%, this will only make differences in claims costs in the hundreds of pounds, so careful consideration of the limit is vital.
Example:
A 21 year old working on your site suffers a serious head injury. He has is expected to live until his 80s, say 87 years old. After the injury, he now requires 24-hour care.
As interest rates have fallen significantly, the Government believed that these lifelong payments to injured parties do not offer the same level of return. With some injured parties stating that the 2.5% rate was leaving them out of pocket. As their long-term investment of the lump-sum was under performing as the UK economy underperformed, therefore this investment no longer offered the same returns as it once did. By reducing the Ogden discount rate the Government has moved the burden of this cost further onto the insurers.
Based on the Ogden rate of 2.5%, a 21 year old male who has been injured and is looking at a future of nursing care and loss of earnings totaling £9,072,028, with the new rate of -0.75% the nursing care and loss of earnings increases to £20,023,103. As you can see from this example, the change in the Ogden discount rate from +2.5% to -0.75% reflects a significant increase in the total settlement of a claim.
It is not unusual for compensation claim costs to be above £10 million. Therefore your policy should have adequate cover for these large figures – just in case.
Knowing about developments like these can help prevent claims that could potentially close your business down if you have not adjusted your liability accordingly. But with our expert, knowledgeable construction insurance teams to help, you can always be confident you are covered.
