What Does Contractors Liability Insurance Cover? A Comprehensive Guide

Imagine a day on the job site when a small accident occurs – a ladder tips over and damages a client’s property. Or perhaps an employee gets injured while working on a project. These incidents could lead to significant financial losses and legal headaches if not properly insured.

This is where contractors liability insurance comes into play. But what exactly does it cover, and how can you make sure you have the right coverage for your specific needs?

We delve into the world of contractors liability insurance, helping you understand “what does contractors liability insurance cover” and navigate the intricacies of securing the right coverage for your business.

What is Contractors Liability Insurance?

Contractors liability insurance is a comprehensive policy that provides protection for public, employers, and products liability, safeguarding against potential financial losses arising from accidents or injury claims.

It’s crucial to understand the different types of contractors insurance available, such as public liability insurance, products liability insurance, and employer’s liability insurance, to ensure you have the right coverage for your specific needs.

Public Liability Insurance

Public liability insurance for contractors is designed to have insurers provide coverage for injury to third parties or damage to their property, protecting your business from legal liability for injuries inflicted on third parties and property damage resulting from your activities.

It’s essential to consider the size of your business and potential risks associated with determining an appropriate level of indemnity. For example, if your construction business mainly handles small residential projects, a lower limit of indemnity may suffice.

However, if you’re working on larger commercial projects with higher risks, higher limits of indemnity may be necessary to provide adequate protection.In either case, it’s crucial to assess your business’s unique risk profile and choose the right public liability insurance coverage accordingly.

Employers’ Liability Insurance

Employers’ liability insurance is legally required for any employer who has staff and provides direct employees with coverage in the event of bodily injury to employees or labour only subcontractors while performing work on behalf of the employer. This insurance covers legal defence costs in the event of claims brought against you for employee injuries sustained while working for you, should you be held liable.

It’s important to note that bona fide subcontractors, who supply both labour and materials for their part of the job and typically hold their own public and employers’ liability insurance, may not necessitate employers’ liability insurance coverage on your part.

Products Liability Insurance

Products liability insurance is crucial for businesses involved in the design, manufacture, or supply of products, providing coverage for compensation and legal costs in cases where a member of the public is injured or their property is damaged due to a product defect that your business designs, manufactures, or supplies.

This type of insurance covers compensation and legal costs associated with bodily injury, property damage, and personal and advertising injury resulting from a defective product.

How Do I Know What Insurance I Need?

Before selecting a contractor’s insurance policy, it’s important to assess your insurance needs by evaluating risks, understanding legal requirements, and customising your policy to suit your specific situation.

Risk Evaluation

Risk evaluation is the process of identifying and assessing potential risks that your business may face, analysing the likelihood and potential impact of each risk. When evaluating risks, you should consider the likelihood of occurrence, the severity of potential consequences, and the cost of mitigating the risk.

For example, a roofing contractor may face more significant risks related to falls and property damage than a painting contractor. By evaluating the risks associated with their specific trade, contractors can make informed decisions about the coverage they need, ensuring they are adequately protected in the event of an accident or claim.

Legal Requirements

While not all types of contractors liability insurance are legally required, understanding the legal requirements in the UK is crucial to guaranteeing that you are sufficiently insured. Public liability insurance is not mandated by law but is generally a contractual requirement in the construction industry.

It’s essential to research the applicable requirements for your locality and consult with an insurance specialist to ensure your business is compliant with all legal requirements. This not only protects your business from potential fines and legal issues, but also protects your reputation as a responsible contractor.

How much does Contractors Liability Insurance cost?

The cost of contractors liability insurance can vary depending on several factors, such as the size of your business, the type of work you do, the scope, value, location, and duration of the contract or work, as well as the risk factors associated with the project.

Trade Type and Risks

Contractors liability insurance provides coverage for a variety of contractors, including those in construction, plumbing, electrical, and more, with risks associated with each trade, such as property damage, bodily injury, and legal expenses from potential lawsuits. For example, a sole trader specialising in electrical work may face different risks than a general building contractor working on large construction projects.

It’s essential to consider the specific risks associated with your trade and business size when determining the appropriate coverage for your contractors liability insurance.

Claims History

A claims history is a record of all insurance claims made by a contractor on their policy in the past, including details such as dates, types of claims, amounts paid out, and any reported injuries. Insurance companies use this information to evaluate the risk of providing insurance to the contractor and identify the cost of the policy.

When evaluating your claims history, consider the quantity of claims made, the magnitude of the claims, and the category of claims. For example, a contractor with a history of multiple small claims may be perceived as a higher risk than a contractor with a single large claim, even if the total payout is similar.

What are Exclusions & Limitations in Contractors Liability Insurance?

Exclusions and limitations are an important aspect of contractors liability insurance policies, and understanding them can help you make the most informed decision when selecting coverage for your business.

Standard Exclusions

Standard exclusions for contractors liability insurance may differ depending on the insurance provider and policy, but common exclusions typically include contractual liability and  professional indemnity. It’s crucial to read the policy wording carefully to be aware of any exclusions that may apply to your specific situation.

Policy Limitations

Policy limitations, such as premises limitations and completed operations property damage coverage, can impact the scope of your contractors liability insurance. The coverage limits may vary significantly depending on factors such as the size of the business, the type of work the contractor does, the scope, value, location, and duration of the work.

Seeking Expert Advice

Consulting an expert for contractors liability insurance can assist contractors in understanding the coverage they require. By seeking expert advice, you can identify potential gaps in your insurance policy and address them accordingly, ensuring your business has the appropriate coverage in place. This not only protects your business from potential claims, but also enables you to save money by finding the most suitable policy for your specific needs.

Can I Personalise My Contractors Liability Insurance Policy?

A one-size-fits-all approach doesn’t work when it comes to contractors liability insurance policies. It’s important to make sure that your own risk insurance policy is tailored specifically for your business and its unique needs by considering additional coverage options.

Professional Indemnity Insurance

Professional Indemnity Insurance provides protection for professionals against claims made by clients and third parties due to negligence, omission, errors, intellectual property infringement, and defamation. This policy covers both legal costs and compensation for any damage resulting from your services or advice.

While it is not a legal requirement, it is recommended for those providing services that are relied upon by other people or businesses.

Tools and Equipment Coverage

Tools and Equipment Coverage is a type of insurance that provides protection for tools and equipment, covering the cost of repair or replacement in case of loss, damage, or theft. This coverage generally includes tools and equipment used in business operations, such as ladders, power tools, and hand tools, as well as any rented or borrowed equipment utilised in the business.

Get Contractors Liability Insurance Today

Tradesman Saver has got you covered with comprehensive contractors liability insurance policies. Our flexible and tailored policies can be designed to meet your exact needs, so you can have peace of mind knowing that you’re properly protected.

Contact us today to get started on the process of securing your contractors liability insurance policy!