If you are running a building project, having the right insurance is essential to protect you from any potential mishaps. You can never be certain if your property will be victim of a flood, fire or fly tipping and the financial repercussions could put your entire project at risk.
Whether it is for buy-to-let or renovating an existing property, you need proper insurance to safeguard your investment and some bridging loans will not even go ahead until you have insurance in place. We highlight the main types of insurance you may need below.
Buildings Insurance
Buildings insurance comes under the form of home insurance and is used to help protect any damage to physical aspects of the building. This includes covering doors, walls, fences, roofs, ceilings and floors. It is designed to protect you from any accidental or unintended damage to physical fixtures of the property, which could be as a result of fire, flooding, vandalism or other peril.
With builders, plumbers and electricians likely to be working on your project every day and using heavy machinery, you never know when something could go wrong. Whether it is faulty wiring or poor plumbing, it is not uncommon for a fire or flood to occur.
To claim from your home insurance policy, there needs to be proof that any damage caused was a genuine accident. Insurers will always do a full inspection of the property and damage before paying out a claim.
Contents Insurance
Contents insurance also falls under your home insurance so policyholders are likely to have a buildings and contents insurance in one policy. Contents refers to physical valuable items that are in the house or flat. This includes any machines, electronics, art, jewellery and other valuable assets. If the place is a complete building site, then most of the contents will not be on the site. But, if you are working on a property where other people are still living and all their goods are still on the premises, then having contents insurance is key in case anything gets lost, damaged or stolen.
For contents Insurance, it is advised to value all your items that you are leaving in your house like the computer, jewellery and TV and take out a policy to cover their value. It is worth slightly over-insuring so that your insurance provider will pay out enough to replace your items. Insurers will typically only pay out what the goods were worth at the time. So if your TV is 5 years old and has fallen in value, you may not receive enough to replace it – hence taking out a little extra cover can be useful.
Public Liability Insurance
Public liability aims to protect any third parties that come into contact with your building project. When you are renovating a property, you are also potentially impacting people around you including neighbours, passers-by or other tenants of the building.
There are plenty scenarios where public liability insurance can be applied. A common one is if your builders are working on the roof and something like a tile falls off and hits the neighbour’s car or hits a pedestrian walking past. The victim has a right to claim damages because you (or your team) were responsible for this. At this point, you would claim on your public liability insurance in order to settle the victim for any replacements, medical bills or compensation.
Other scenarios include what would happen if your building work accidentally set fire to the neighbour’s house? Or what if your boiler broke and then flooded other tenants in the building? This types of damages and repairs could be covered by your insurance.
Business Interruption Insurance
Business interruption refers to any costs that you have to incur due your project being interrupted. Perhaps you are working on a deadline or you will need to refinance due to the project taking longer than expected. Whether it is a fire, flood, snow, fly tipping or squatters on your premises, there are several things that could make your project delayed. After all, we all know that building work can take longer than we expect.
Rather than suffer the financial burden, your business interrupted insurance can contribute to any additional costs you may have whether it is building costs, loss of rent income or extra costs required to repay your loan.
Professional Indemnity Insurance
Professional indemnity or PI, is less for you but more the people that you hire. Any professions such as builders, architects, plumbers and engineers are using their expertise when working on your building. However, if they give you bad advice or carry out their work poorly, it could have a huge impact on the overall success of your project and the bottom line.
As a result, you may decide that you wish to take legal action and request compensation for any loss of income or delays in your project. Your potential settlements will come out of the contractor’s professional indemnity insurance. So it is a common thing to ask any professionals that you work with beforehand if they have PI cover.
Employers Liability Insurance
Of all the insurance types mentioned above, employer’s liability is the only one which is required by law. This is cover for any employees that are working on your premises. They must be your own staff that you hire because any staff belonging to your contractors must go under their own separate policy. Failing to show proof of employer’s liability insurance upon request or a certificate can lead to a minimum daily fine of £2,500 and further prosecution.
The idea of employer’s liability is that you have a duty of care for any of your staff members and are responsible if they have an accident at work. Working on a building site poses risks, especially with different materials and obstacles that could cause injury. If one of your people gets injured at work, you can claim on your policy in order to pay for any medical bills, compensation or time off work.
You are required to have a minimum of £5 million worth of cover by law of which a policy may only be a few hundred pounds to purchase. The only exceptions are if you run a family business, you are not required to purchase employer’s liability cover for your own family members. Also, any freelancers, sole traders or consultants are required to insure themselves and this is not your responsibility.
How Much Does Insurance Cost?
The cost of insurance will vary on the size of your overall project. Naturally, the refurbishment of a large property which is being changed into 12 rooms will require more staff, budget and insurance than the renovation of a small 2-bed home.
Whilst insurance can easily start from a few hundred or thousand pounds, it is important to cost up the potential risks and what the cost of any damages will be. Using a good insurance provider will help you better understand any risks and levels of cover that you need and it is important to speak to your partners and contractors to ensure that you are all fully covered to carry out the necessary work.
