When the Build Starts – Why Contractor Cover Isn’t Enough
When the Build Starts – Why Contractor Cover Isn’t Enough
You’ve secured your site, sorted your plans, and finally, the building work is about to begin. You might think that now the contractor is taking over, you can step back from the worry of insurance. After all, they’ll have their own cover – right?
Unfortunately, it’s not that simple. Even when work is in full swing, as the property owner you still have responsibilities and risks that the builder’s insurance may not cover. If you don’t arrange the right protection, you could be left footing the bill for damage or even accidents on site.
Why You Can’t Rely on the Builder’s Insurance Alone
Many people assume that once the main contractor is on site, the builders insurance will protect everyone and everything. The reality is quite different:
- The contractor’s policy belongs to them, not to the project – If you fall out with the builder or they walk off the job, their cover goes with them. Any new contractor will only insure the work they do, leaving earlier works uninsured.
- Only the contractor can claim on their policy – If something goes wrong, you can’t make a claim directly – you have to rely on the builder doing it for you.
- Claims are paid to the builder, not you – Any insurance payout goes to the contractor first, which could cause delays or disputes about how the money is used.
- Commercial policies are not consumer-friendly – Contractors’ policies are considered commercial cover, so they aren’t protected by the Insurance Ombudsman or the Financial Services Compensation Scheme. Mistakes in the builder’s application or record-keeping could void the policy entirely – leaving you with no payout.
Real-World Example
A homeowner engaged a single trusted contractor for a major renovation. Midway through the project, the builder suffered financial problems and stopped paying his insurance premiums. The policy was cancelled without the homeowner knowing. A week later, storm damage tore off part of the roof. The works were uninsured, and the homeowner had to pay for repairs out of pocket – as well as contending with finding a new contractor.
Existing Structures Still Need Cover
If you have an existing building on site – even if it’s being partially demolished or heavily altered – your lender will probably require it to be insured for “full perils” during the works.
A standard home or property owners’ policy is unlikely to meet this requirement once building work starts. At best, it might be reduced to “FLEA” cover (damage caused by Fire, Lightning, Explosion, Aircraft/vehicle collision) with a works exclusion, which leaves you exposed to risks like:
- Storm or flood damage when the building is partially open to the weather
- Theft or vandalism when windows and doors are removed
- Fire or explosion linked to the works
A Building Project Insurance policy is designed to protect existing structures during works – and to meet lender requirements.
Protecting the Works Themselves
The work you’re paying for – whether it’s a new extension, a new roof, or a complete build – also needs protection. This is called “Contract Works” or “Works in Progress” cover.
If you rely solely on the contractor’s cover, you face the risks we’ve just discussed. By arranging your own Building Project policy that includes the works, you ensure:
- You own the policy
- You can make a claim directly
- You control how and when any payout is used
Yes, this costs more – but in most cases, the builder is charging you for their insurance anyway as part of their price. You might as well have control over it.
The Insolvency Risk
If your contractor becomes insolvent partway through a job:
- Any insurance they arranged for the works stops immediately.
- If the insolvency was due to a loss (e.g., a fire on site), any claim payment may go to the insolvency practitioner – not you.
With your own Building Project policy, the cover stays in place regardless of the builder’s financial position.
Another Real-World Example
A property owner was halfway through a new build when the main contractor went bankrupt after a fire on site. Because the builder’s policy covered the works, the claim payment went into the insolvency pot to be shared among creditors. The property owner received nothing – and had to fund the rebuild themselves.
The Best Approach – Insure It Yourself
Even if you’re using just one contractor you’ve known for years, the safest route is to arrange a Building Project policy in your own name that covers:
- Existing structures
- The works in progress
- Any materials you’ve purchased directly (e.g., kitchens, tiles)
- Anything that is going to be reused or salvaged
That way, you control the cover, you make the claims, and you receive the payouts.
Key Takeaways
- A contractor’s insurance protects them, not you.
- If they leave the job, their cover leaves with them.
- Without your own Building Project policy, you’ll be uninsured for earlier works if you switch contractors.
- Insuring both existing structures and works yourself keeps you in control.
Need expert help arranging cover for your build?
Call 01825 745 410 – every call is answered by a qualified advisor.
Email enquiries@jctinsurance.com for a fast, personal response.
Next article in the series: The Power of Joint Names Insurance