Insurance for Building Projects: What You Need and What Your Builder Needs

Your builder's cover, and the minimums

Any contractor working on your home should hold public liability insurance, and must hold employers liability insurance if they employ anyone, including most labour-only subcontractors. Employers liability is a legal requirement with a statutory minimum of five million pounds.

Contractor insurance: what to expect on a domestic project. Cover | Typical level | What it protects. Public liability — £1m – £5m (£2m common) — Injury to you or third parties, damage to your property; Employers liability — £5m minimum (legal requirement) — Injury to their workers on your site; Contract works / all risks — Value of the works — The unfinished work itself: fire, storm, theft, vandalism; Professional indemnity — £250k – £1m — Where the contractor also provides design; Tools and plant — Varies — Their equipment, not your building

Contract works cover is the one that gets missed

Public liability covers damage the builder causes to your existing property. It does not cover the new work itself. If a half-built extension is flattened by a storm or a partly finished loft is destroyed by fire, contract works insurance is what rebuilds it.

On a smaller project the builder often carries this. On a larger one it is sometimes taken out by the homeowner, particularly under a JCT-style contract. What matters is that somebody has it and both parties know who.

Tell your own insurer, in writing

Most residential buildings policies contain a condition about material alterations. Depending on the wording, cover may be reduced, suspended or voided during structural work, and an unoccupied property under renovation is almost always excluded from standard cover after thirty to sixty days.

Notify your insurer before work starts, describe the project honestly, and get the response in writing. Some will endorse the existing policy for a small premium, some will require a specialist renovation policy, and a few will decline, which is far better to discover in advance than in a claim.

Notify before the first delivery arrives, not once scaffolding is up · State the value and duration of the works · Confirm whether the property will be unoccupied at any point · Ask specifically whether theft and escape of water remain covered · Keep the written confirmation with your project file

How to verify a builder's insurance properly

Ask for the certificate, not a screenshot. Check that the insured name matches the company on the quote, that the policy is in date, that the indemnity limit is appropriate to the value of your project, and that the trade description on the certificate matches the work being done.

A certificate for a general handyman does not cover structural alterations. If the project involves steelwork or excavation near a boundary, the policy needs to reflect that.

Deposits, staged payments and structural warranties

Large upfront deposits are the most common route to loss, and no insurance policy protects you from them. Pay for materials against invoices, use staged payments tied to completed milestones, and hold a retention of around five per cent for a few months after completion.

For new builds and major structural work, a ten-year structural warranty from a recognised provider is worth budgeting for, typically one to two per cent of the build value. Lenders often require one on a newly built dwelling, and it is far cheaper to arrange before work starts.

What to do if something goes wrong

Photograph everything, immediately and with dates. Report the incident to your own insurer and ask the contractor to notify theirs. Keep communication in writing, and do not authorise remedial work that removes the evidence before both insurers have had the opportunity to inspect.

Guarantees, and what they are actually worth

A guarantee from a contractor is only as good as the company standing behind it. A ten-year written guarantee from a business with three years of trading history is a promise, not a policy, and it disappears if the company does.

Insurance-backed guarantees are different. They are underwritten by an insurer, so cover survives the contractor ceasing to trade, and they are common on roofing, damp proofing and window installations through trade association schemes.

Ask which type you are being offered, who underwrites it, what it excludes and how a claim is made. Then keep the certificate with the rest of your project paperwork, because a guarantee nobody can find is worth nothing at all.

Frequently asked questions

Is public liability insurance a legal requirement for builders?

No, but employers liability is if they employ anyone. Public liability is not compulsory, which is precisely why you should check it exists and read the limit before work begins.

Will my home insurance cover building work?

Usually only if you notify the insurer and they agree in writing. Many policies restrict cover during structural alterations and exclude unoccupied properties, and undisclosed works can invalidate a later claim.

Who insures the extension while it is being built?

Contract works insurance covers work in progress. Agree in writing whether the contractor or you are carrying it before the first day on site.

What indemnity limit is enough?

For most domestic extensions, two million pounds public liability is a reasonable minimum. Where the work is close to neighbouring buildings, a shared wall, or involves excavation, higher is sensible.