Construction Insurance for London Home Projects: What Cover Your Contractor Must Have

Insurance is one of the most overlooked aspects of appointing a contractor for London home construction. Many homeowners assume that the contractor is insured without checking, or that their own home insurance covers construction works. In practice, inadequate contractor insurance and gaps in homeowner coverage can leave both parties significantly exposed.

Public Liability Insurance (PLI): Public liability insurance covers the contractor's legal liability for injury to third parties (members of the public, neighbours, the homeowner) or damage to third-party property arising from the contractor's operations. For London residential projects, PLI of at least £2,000,000 (and ideally £5,000,000 or more) is the standard minimum. PLI is not legally required, but it is a basic professional requirement and virtually every competent contractor will hold it.

Employer's Liability Insurance (EL): Employer's liability insurance covers the contractor's legal liability for injury or illness suffered by their employees during the course of their employment. EL is a legal requirement for all UK employers who have one or more employees (including subcontractors who are employees, as opposed to genuinely independent subcontractors). The minimum legally required cover is £5,000,000. Reputable contractors hold £10,000,000 as standard.

Contract Works Insurance (also called All Risks or CAR insurance): Contract works insurance covers the works themselves against loss or damage during construction -- fire, flood, theft, vandalism, accidental damage. This is particularly important for London residential projects where materials and part-built structures on site are at risk, and where the homeowner's existing buildings insurance may not cover works under construction. Contract works insurance may be taken out by the contractor (contractor-responsible) or by the client (client-responsible) -- the contract should specify who is responsible.

Professional Indemnity Insurance (PI): Relevant where the contractor is providing design services (design-and-build) in addition to construction. PI covers the contractor's legal liability for losses arising from errors or omissions in their professional design advice. Required where rcbGroup operates in a design-and-build capacity.

Before signing a construction contract or allowing works to start, London homeowners should:

1. Request copies of current insurance certificates -- PLI, EL, and contract works insurance. Check that the policy is current (not expired), that the level of cover is adequate, and that the named insured is the same legal entity you are contracting with.

2. Check the expiry dates -- an insurance certificate that expires two months into a six-month project is not adequate. Either require a certificate for the duration of the project, or confirm that the contractor will renew and provide evidence of renewal.

3. Confirm whether contract works insurance is included -- some contractor's policies include contract works cover; others do not. If the contractor's policy does not include contract works, consider whether you need to arrange a separate homeowner's construction policy.

4. Check your own home insurance: notify your home insurer that construction works are planned. Many home insurance policies exclude works above a specified value, or require notification of any significant structural alteration. Failure to notify can invalidate your existing buildings insurance during the works.

Damage to the homeowner's property (caused by the contractor): If the contractor's negligence causes damage to your property (a burst pipe, structural damage from incorrect work, a fire), the contractor's PLI should cover the cost of remediation. You claim against the contractor, who claims against their PLI insurer.

Damage to a neighbouring property: If the contractor's works cause damage to a neighbouring property (cracking from excavation, a fire spreading to the adjoining terrace), the contractor's PLI covers the neighbour's claim against the contractor. The schedule of condition (prepared before the works started) is the key document for establishing what damage was caused by the works.

A worker is injured on site: If a worker employed by the contractor is injured on site, the contractor's EL covers the claim. A worker of the homeowner who is injured on site would need to claim against the homeowner's liability cover -- which is one reason why having a properly appointed main contractor is important.

Materials or the part-built structure are damaged or stolen: Contract works insurance covers this. Without contract works cover, the cost of replacing stolen materials or repairing a damaged structure falls to the uninsured party.

Membership of trade associations such as the recognised trade body, independent client reviews and recognised quality schemegenerally requires that contractors hold current PLI and EL as a condition of membership. Membership is not a guarantee of adequate cover but provides an additional layer of verification.

rcbGroup holds current Public Liability Insurance (£5,000,000), Employer's Liability Insurance (£10,000,000), and Contract Works Insurance. Copies of our insurance certificates are available on request before appointment.

Contact our team to discuss your London home project.