What Is Contract Works Insurance and Do Builders Really Need It?

What Is Contract Works Insurance?

Contract works insurance covers the physical construction work on your project while it's underway. If your site suffers damage from fire, flood, theft, storm, vandalism or accidental events before completion, this policy pays to repair or replace the work already done.

It covers materials incorporated into the build and the labour costs you've already invested. Whether you're building an extension, converting a loft, constructing a new home or managing a major renovation, this insurance protects your project until the client signs it off.

Contract works insurance is also known as contractors' all risks insurance or construction works insurance. These terms are used interchangeably across the industry.

How Contract Works Insurance Differs from Public Liability

Public liability insurance covers damage you cause to other people or their property. It does not cover damage to the construction work itself.

Example: A storm tears scaffolding loose and damages brickwork you've just laid. Public liability won't pay to rebuild that work. Contract works insurance will.

Public liability protects others from your work. Contract works protects your work from damage.

Most builders need both. Why Roofers Need More Than Just Public Liability Insurance explains why single-cover policies often leave gaps in protection.

Who Needs Contract Works Insurance?

This cover is designed for builders, main contractors and developers responsible for delivering a finished construction project.

You're likely to need it if:

• You're undertaking structural work such as extensions, conversions or new builds
• Materials and labour form a significant part of your contract price
• You're responsible for the finished result until handover
• The project will take weeks or months to complete
• You're working on high-value residential or commercial builds

Subcontractors don't usually need their own policy unless they're taking full responsibility for a defined section of the build. In most cases, the main contractor's policy covers subcontracted work.

Smaller jobs such as bathroom refits, decorating or minor repairs rarely justify the cost. But if you're managing multi-trade projects with significant value at risk, contract works insurance becomes essential.

What Does Contract Works Insurance Cover?

Most policies include:

• Materials stored on-site and incorporated into the build
• Labour costs for work already completed
• Temporary structures such as scaffolding, site huts and hoarding
• Hired-in plant and equipment used on-site
• Debris removal and site clearance following insured damage
• Damage from fire, flood, storm, theft, vandalism and accidental damage

Some insurers also cover materials in transit to site or stored off-site, but this is less common and often needs to be added separately.

What's Not Covered?

Contract works insurance has limitations. It typically excludes:

• Hand tools and power tools (these need separate tool insurance)
• Existing structures not part of the contract (usually covered by the property owner's buildings insurance)
• Design faults or poor workmanship
• Delays caused by supply chain problems or labour shortages
• Wear and tear or gradual deterioration
• Loss of earnings or project overruns

Always read the policy wording carefully to understand what's included and what isn't.

Is Contract Works Insurance a Legal Requirement?

No. There's no legal obligation to hold contract works insurance in the UK.

However, it's increasingly common for clients, developers, architects and project managers to request it as a condition of contract, particularly on larger builds. If you can't provide proof of cover, you may lose the job.

Even when it's not required, many builders choose to include it in their insurance package. It protects your cashflow, avoids disputes with clients over who's responsible for damage, and demonstrates professionalism.

How Much Does Contract Works Insurance Cost?

Premiums depend on several factors:

• The total contract value
• Type of work (new builds, renovations, conversions)
• Project duration
• Location and site security
• Your claims history

As a rough guide, expect to pay between 0.1% and 0.5% of the total contract value. A £200,000 project might cost £200 to £1,000 to insure, depending on risk.

Some policies are project-specific. Others offer annual cover for all your projects up to a certain value, which can be more cost-effective if you run multiple jobs throughout the year.

Real-World Examples: When Contract Works Insurance Pays Out

Fire on site: A small electrical fire spreads through a half-finished loft conversion, destroying new joists, plasterboard and insulation. Contract works insurance covers the £18,000 needed to replace materials and repeat the work.

Theft of materials: Thieves break into a new-build site and steal £12,000 worth of fitted kitchens and bathroom suites already installed. The policy pays to replace them.

Storm damage: High winds rip scaffolding from a two-storey extension, damaging completed brickwork and smashing windows. The insurer pays £9,500 to repair and rebuild.

Vandalism: Trespassers damage freshly poured concrete foundations and spray-paint internal walls. The policy covers the £6,000 cost of removal and reinstatement.

Without insurance, the builder absorbs these costs or risks legal disputes with the client.

Do Builders Really Need Contract Works Insurance?

If you're working on high-value projects, the answer is yes.

Without it, you're personally liable for the cost of repairing or replacing damaged work. On a £150,000 extension, a fire or flood halfway through could leave you tens of thousands of pounds out of pocket, with no way to recover the loss.

Even if the damage wasn't your fault, the client may expect you to complete the job. Without insurance, you either absorb the cost or risk legal action.

Contract works insurance protects your business, your reputation and your ability to deliver. It also reassures clients that their project is secure, which can help you win more work.

How to Choose the Right Contract Works Insurance Policy

When comparing quotes, make sure you discuss:

• The types of projects you typically work on
• Average contract values and project durations
• Whether you need cover per project or annually
• What exclusions apply to your trade
• Cover limits for materials, plant and temporary works

Most specialist tradesmen and builders insurance policies offer contract works cover as an optional extra. It can be added to a package that includes public liability, employer's liability, tools and equipment cover.

If you work across multiple trades or use subcontractors, Do Groundworkers Need Insurance for Subcontractors? offers useful guidance on how cover extends across your team.

Get a Quote for Builders Insurance with Contract Works Cover

Protecting your projects doesn't have to be complicated. Use the button on this page to get a tailored quote for builders insurance that includes contract works cover, public liability, tools and more. Compare policies designed for UK tradespeople and find the right protection for your business.