Inadequately insured builders and tradesmen cost homeowners an average of £40,000 for each insurance claim made last year, experts have suggested.
ConstructionInsure.co.uk have reported that around half of all UK contracting firms, including builders, plumbers, roofers and electricians, do not have adequate insurance in place to cover works.
The use of price comparison websites for insurance services is blamed for leading to an epidemic of under insurance across the construction sector.
This insurance shortfall hit homeowners with an average £40,000 in uninsured claims which went unpaid last year, according to reports.
Even many large contracting firms with multi million pound turnovers are said to be unaware that their insurance is unfit for purpose with the use of insurance comparison websites, often leading to purchasing an inadequate policy.
Mark Herbert of ConstructionInsure.co.uk, said: “Many homeowners forget to notify their insurance company that building works are taking place. A lot of insurers need to know if any works above the value of £20k are being carried out. Failure to notify insurers will void the policy if there was any form of claim.
“Home owners also need to inspect insurance documents from prospect builders before agreeing to quotes and going ahead with works. Failure to do so could have disastrous consequences, with homeowners at risk of losing around £40k for each claim made where contractors have been trading without the right insurance.
“Every week we see numerous cases of contractors being severely underinsured and this is down to them not properly informing insurers about the nature of their work.
“From our enquiries, we estimate around 50% of all UK contractors do not have adequate insurance in place. Many contractors take out a basic policy and fail to check the small print which often includes caveats about the nature of the work they are covered for.
“They assume they are covered but the reality is the policy may not be worth the paper it is printed on if it doesn’t cover them for the work they are actually undertaking.
“Contractors are not always to blame for this. Unfortunately, they might have gone on a comparison site which is the worst place to go as these sites will never be able to question and answer a client about their business like an experienced broker can to extract the correct risk information.
“Builders and other contractors may feel they are saving money by taking out cheap insurance policies but if the policy doesn’t cover their needs it will be invalid anyway.
“It is far better to buy the genuine peace of mind of knowing your work is properly insured than to throw away cash on a policy which isn’t fit for purpose.”
Mark also stressed that there is a legal requirement for contractors to make sure they are insured by giving their insurance company full disclosure on the nature of the work they undertake.
He said homeowners should ask builders and other tradesmen to produce insurance policies and check the small print to make sure all aspects of the job are covered.
He continued: “The insurer needs to know everything about each project – from all planned work, to the staff employed to carry it out.
“Employment of staff can vary for each build, so insurers need to know about all work sub contracted out to construction companies or if labour only sub-contractors are used.
“General builders with standard cover for internal renovation works and public and employer’s liability cover may think that they’re covered for everything, but often they are only covered for employees, sub-contractors and any damage to a third-party property, leaving external works like lofts, new builds and extensions uninsured.
“If these works are being carried out by a contractor with just an employers and public liability policy in place they will not be covered. What is needed is a contractor’s combined insurance policy.
“Contractors also need to protect themselves against other tradespeople that are working on part of a client’s build. For example, if you are the main contractor and another tradesperson who has been working as a bona fide sub-contractor makes a mistake on site, it may transpire that they had inadequate insurance or had their policy cancelled for non-payment.
“The client would then have to make a claim against the main contractor, so it’s crucial that you as the main contractor notify insurers about all works that are being carried out. If contractors don’t have the correct insurance to cover these costs, it could mean insolvency for the business. So it’s worth protecting yourself and speaking to a specialist to get the correct advice.”
