If you are a housebuilder or property developer, you must have the right insurances in place to protect your business and its customers.
When you’re starting out in the property industry, the sea of insurance products available and the conflicting online advice about what you “should” have can be overwhelming.
Our part-exchange experts have created this beginners’ guide to developers’ and housebuilders’ insurance to help you navigate the options available and choose the right cover for your business.
Essential Insurance Cover for Housebuilders and Property Developers
Legal Indemnity Insurance
During the site or land acquisition project stage, a developer needs this type of insurance to protect them against title defects identified during the due diligence process. Legal indemnity insurance covers a wide range of risks, such as restrictive covenants and title to property that might arise pre-transaction.
Builders’ Public Liability Insurance
This covers you or your employees if someone is injured in the workplace or onsite property is damaged. For example, if a structure your employee is building collapses and injures a member of the public or if an employee is harmed by faulty equipment. The insurance premiums charged will depend on the level of cover your business requires; the higher the maximum payout limit or “indemnity limit”, the higher your monthly fee will be. There may be an option to increase the amount of excess due when a claim is made to reduce the monthly premium.
Builders are not required by law to take out public liability insurance, but it provides essential cover that protects third parties against injuries, death and accidental damage.
Employers’ Liability Insurance
If an employee gets ill or is injured while working for you, employers’ liability insurance will cover costs such as medical bills and legal fees.
You are legally required to take out this type of insurance if you employ anyone. You must do so as soon as you become an employer. Your policy must cover you for at least £5 million and be provided by an authorised insurer. Failure to take out sufficient insurance can result in a fine of £2,500 for every day you are not covered.
An example of a claim that might be made under this type of cover would be if an apprentice or junior staff member receives an electric shock from one of the business’ faulty power tools.
Contract Works Insurance
If your development project is damaged during construction by a fire, flood, vandalism or similar, contract works insurance will provide appropriate cover. You can claim for repair costs and the labour and materials required to get your development plans back on track.
For example, if fire damage destroys part of a new home you are building, you could claim for the cost of materials and labour to repair the damage. You’ll need to take out additional cover to protect existing structures on the site.
Installer’s All-Risk Cover
Protect any building works carried out that is accidentally destroyed by taking out this essential cover either during construction or before the new homeowner has the opportunity to take out their own insurance.
Many housebuilders and developers forget or neglect to take out this type of cover, resulting in huge bills for their customers and a damaged brand reputation.
Professional Indemnity Insurance
If a customer claims that they have lost money because you provided poor service, advice or designs, professional indemnity insurance will cover the legal costs and expenses associated with defending the claim.
For example, if you advise a customer that using MDF supports will be sufficient to support a wall-mounted cabinet that subsequently falls off the wall and breaks.
Tools and Equipment Insurance
This covers any business tools or equipment that is lost, stolen or damaged. For example, your worksite is broken into at night, and valuable tools are taken, or a flood causes irreparable damage to essential electrical equipment.
If you want to insure tools that are taken offsite, such as in a works vehicle or hired machinery, you will need to take out additional cover.
This protects your business against the loss or damage of buildings adjacent to or close to your development site when you have not carried out any negligent actions.
What Information Will You Be Asked to Provide?
If you’re applying for insurance as a small business owner, you may be asked for some or all of the following information:
- A description of the business, including its start date
- Details of what you’re doing to ensure that indemnity is being provided under the terms of the policy
- Previous insurance history
- Your prior experience managing property developments (and that of any partners or directors)
- Employee Reference Number (ERN) and Pay As You Earn (PAYE) reference
- Projected income and expenditures for the next 12 months
- Details of regular annual payments from the business (including salaries)
- Details of any insurance claims made in the last five years.
The insurance provider will also require details of the planned property development, including the property address, rebuilding cost, age, construction details and the total value of any equipment and tools to be kept on site. Every insurer will set its own criteria for insurance applications, so it’s a good idea to shop around and compare terms and quotes before signing anything.
Developers’ and Housebuilders’ Insurance FAQs
Q. Do I need business insurance if I am a subcontractor?
A. You should be covered by your contractor’s insurance, but this may not extend to any periods when you are working unsupervised.
Q. Is public liability insurance enough on its own?
A. You might need more than public liability to cover certain kinds of property damage, for example, hired-in plant cover or contract works cover.
Q. Do I need to take out insurance for all of my employees?
A. You are legally required to take out employers’ liability insurance as soon as you take on your first employee. Your policy should cover part-time staff, full-time staff and subcontractors.
Q. How is the price of my business insurance cover calculated?
A. There are many factors insurance companies use to determine the cost of your premium. These can include the value of the business’ tools and equipment, your claims history, the level of danger your employees are exposed to onsite and more. Your quote will be tailored to the unique requirements of your business.
Q. What insurance do property developers need when using contractors?
A. Even if the contractors you hire have their own public liability cover, it’s still a good idea to get your own to ensure there are no gaps in coverage if an incident occurs and it is not clear who is liable. You will also need employers’ liability insurance.
Whether you’re setting up a new business or you’re an established housebuilder or property developer, HBB Solutions can help you keep your development plans on track and deliver an exceptional customer experience.