Builders public liability vs contractors all risks insurance

A sole trader builder, undertaken fairly standard tasks with no height, depth or heat work will be able to get a public liability insurance policy, with a £1,000,000 limit of indemnity for around £150 per year. There will, as with most policies, be an excess for them to pay, usually between £100 and £250 for damage to third party property. But, with the potential pay out of up to £1m per occurrence, we think around £12.50 a month is a price worth paying.

As the builder starts to take on tasks or activities which represent more risk, such as depth work below 1 metre, work on roofs or work using blow torches or blow lamps, this needs to be declared to either their business insurance broker and/or insurer. This will, understandably increase the premium, as the risk of damage has increased.

For other trades, such as plumbers, electricians and heating engineers, the base rates are higher, because all of these business activities represent an increased insurance risk. This does not mean that different trades are more careless. The increased rating is purely based on insurers previous experience of the different trades. When they work on statistics over ten, twenty or even fifty years, they build up a detailed picture of what rates to charge to not only provide an insured with correct cover, but importantly to try and make themselves a profit. Of course, many will get the figures wrong, but on balance, they try to charge competitive premiums for the business insurance they want to pick up. For the business they do not need, they price themselves out of the market.

Returning to our builder, as the business grows they may find that there are requirements for additional cover. If the sole trader takes on additional help, these will be deemed to be employees (if they are working under the builders direction and control) and there is a legal requirement for employers liability insurance.

In addition, the business may need to cover their own tools, equipment and plant and potentially any plant they have hired in to them. This is where there needs to be consideration given to changing from a basic liability only insurance policy, to a full contractors all risks insurance.

Most commercial insurance companies will have a contractors all risks, or CAR policy, that is suitable for not only the public and employers liability, but also the plant and equipment. In years gone by, this used to be a much more expensive policy option, Minimum premiums from many insurers were £1,000 plus insurance premium tax. However, and thankfully, many of the more agile and nimble insurers have realised that if they price without minimum premiums, then they will pick up a larger share of the market. The other beauty of pricing lower is that you may pick up the bigger companies when they are smaller. There is then the possibility of the company sticking with the insurer over the years as they grow and grow. Think of every single private sector company and they all can trace their roots back to much smaller businesses.

If you need this sort of policy, the only way to get this cover is through a broker. Yes, there are sites which offer to compare business insurance, but C.A.R. policies are complex enough to warrant a discussion with a broker, rather than chancing your arm that the policy you have bought online is suitable.