Protect Your Construction Business with the Right Insurance Cover

Managing construction projects involves navigating numerous and diverse challenges. The complexity and uncertainty mean business owners must work hard to address and mitigate risks. Therefore, selecting the right construction business insurance is crucial for ensuring your business is not exposed to these risks.

In this article, we outline the types of insurance cover to consider, why it’s important and the key considerations for construction business owners.

What is construction business insurance, and who needs it?

Construction business insurance protects workers in the construction sector, including builders, bricklayers and project developers, from the costs of claims of damage, injury or negligence. 

While every company needs to be insured in some form or another, construction businesses face an array of risks and liabilities. This means arranging various policies to protect the business, people and project components. Regardless of your business size, having comprehensive coverage helps you avoid significant financial or reputational impact in the event of accidents, compliance issues or legal challenges. 

Here’s a snapshot of the insurance considerations for different players in the construction sector:

• Sole traders: Working as a sole trader leaves you vulnerable to things like personal injury, personal liability and damage to tools used. So, you’ll need public liability cover, income protection and potentially equipment cover.
• Limited companies: Being responsible for more people increases the scope of cover required, such as employers’ liability, protection for directors and professional indemnity. You need broader construction business insurance to account for added responsibilities, growth and managing larger contracts.
• Main contractors: Again, you’ll likely need public and employers’ liability, professional indemnity, plant and tool cover and contract works insurance, which protects you against loss or damage during building work in progress. As main contractors can be liable for all on-site activity, many choose a policy that covers the full project.
• Subcontractors: When working under main contractors, you must ensure you’re personally protected, meaning in addition to public liability, you may need professional indemnity (if providing advice or supporting build design). However, your insurance responsibilities depend on whether you’re labour-only (covered by the main contractor) or bona fide (working under your own direction and supplying tools), which means getting separate business insurance for construction projects.
• Developers and consultants: Due to the nature of these roles within construction projects, professional indemnity is a must, and developers may need project-specific insurance. Risks relate to potential claims of financial loss due to negligent advice or poor design, rather than physical injury or damage.

Do I need insurance to run a construction business in the UK?

Yes, but the type of insurance you require depends on your circumstances, trading status and other factors. Some forms of construction business insurance are mandatory, while others are nice-to-haves or coverage stipulated by clients or stakeholders. For example, if you employ people, you must legally have employers’ liability cover. If you’re responsible for vehicles and equipment used on site, you need cover for loss, damage or accidents.

In a sector where businesses can struggle with cash flow gaps caused by large upfront project costs, staggered payment schedules and late client invoice payments, getting the right insurance saves further headaches during construction projects.

Which business insurance does a construction company legally need?

Some construction business insurance is a legal requirement, while others are good practice for business owners or construction contractors, developers and consultants. It depends on your specific situation. 

Employers’ liability insurance is legally required if you employ anyone for your construction business/projects (including temporary workers), and professional indemnity is a must if you provide consultation and design for builds, as it offers protection if any client challenges the quality of your work and advice.

While public liability insurance isn’t strictly required by law, it’s often expected as part of project contracts, and vehicles and equipment used for construction projects should be insured – this can help you win projects and ease stakeholder concerns. 

Due to the various risks involved, many developers, contractors and construction firms choose contractors' all-risk insurance, which is a catch-all policy for specific projects. It typically includes contract works insurance, public liability, employers’ liability (if required) and own plant and hired-in plant/equipment cover. 

Explore the main types of business insurance for construction companies and what they cover.

Why liability insurance is essential for construction companies

The main purpose of construction business liability insurance is to minimise risk and protect you, your business and various third parties, including employees, in the event of accidents or damage. Due to the hazardous nature of building sites, adequate liability insurance helps prevent financial and reputation issues if incidents occur.

The annual cost of work-related injury and ill health across all UK industries reached £21.6 billion in 2024. This was an increase of £2.8 billion from the previous year. Meanwhile, the construction industry accounted for 37% of workplace-related fatalities (according to HSE’s 2024 annual statistics).

While not exclusive to the construction sector, UK property insurers are expected to pay out a record £5.5 billion relating to claims from 2024 – the highest level since 2007, according to Deloitte.

You may require multiple types of liability insurance for construction projects, such as public liability, employers’ liability, product liability and professional indemnity. Also, consider contractual liability insurance, which covers liabilities assumed by a project contract that are not covered by standard public liability policies.

Here are some key ways liability insurance can support your construction business:

• Protecting you against third-party claims for injuries and property damage occurring on building sites (trip hazards, machinery, falling objects, etc.).
• Covering legal fees and compensation from claims, to protect your finances.
• Assisting you in meeting contractual obligations for prospective projects.
• Ensuring access to building sites – many sites will require proof of liability insurance.

Types of insurance for construction businesses explained

Let’s take a look at the main types of insurance to consider and their relevance to construction businesses:

• Public liability: Covers liability for injury to or death of third parties (other than your employees) and damage to their property. Therefore, it can include clients, independent subcontractors or members of the public visiting building sites.
• Employers’ liability: As you’re responsible for your employees, this compulsory cover is for liability for any injury or illness to staff directly resulting from working on your construction projects.
• Professional indemnity: Cover against legal costs and liability for any damage, mistakes, or negligence claimed against any professional services provided, such as consultation, project management or contract administration – site surveying, development planning, design responsibilities, etc.
• Product liability: Protects you against liability resulting from product defects in construction projects that cause damage to property or injury.
• Tool and equipment cover: Protection against theft, loss or damage to handheld tools and equipment used on-site. The cover ensures you can replace them swiftly to prevent excessive project delays.
• Plant and machinery insurance: Covers damage to or theft of heavy machinery and construction equipment, such as excavators or cranes, whether when in use, in transit or stored.
• Business interruption insurance: Focused on financial loss resulting from construction projects being disrupted by insured events, like fires or floods.
• Commercial vehicle insurance: Covers risks of accidents, theft or damage to vehicles used for construction projects, such as for transporting equipment and materials to and from building sites.
• Contract works insurance: For any construction work that must be repaired or redone if damage occurs to temporary structures or partially completed work.
• Contractors’ all-risk insurance: Combined cover that incorporates various liabilities and protects you against the impact of damage, repairs and legal costs for incidents occurring during a construction project.

Consider getting an all-in-one policy to cover all your insurance needs. Digital insurance brokers like Simply Business enable you to build a tailored construction business insurance policy to cover the different risks your business faces.  

How much does construction business insurance cost?

The cost of construction business insurance varies depending on the level of cover you require, influenced by your company's status, the scope of your projects and your risk appetite. While you may see business insurance for construction companies advertised for as little as £5 per month, costs for most businesses are likely to be somewhere between £100 and £500 per year, as these advertised prices are for the most basic liability cover. The average annual insurance cost for builders is £168.24.*

If you consider that the average business insurance claim is £3,377*, then the cost of fixing insurable problems yourself is significantly more expensive than taking out insurance. Plus, if you’re found to be uninsured for cover that is legally required, like employers’ liability insurance, you could be fined up to £2500 for each day you’re uninsured.

*Figures from 2024 Simply Business data via MoneySuperMarket.

Various factors influence your construction business insurance costs, such as:

• The type of construction work you’re involved in (roofing, scaffolding, etc.), as it can lower or heighten risks
• Your legal entity/trading status
• Number of employees you have on your books
• Tools, equipment and vehicles to insure and if you own or hire them (as owned assets require covering the full value) 
• Company turnover – insurers take into account turnover when assessing risk and the likelihood of claims
• Past claims history
• Whether you plan to pay annually or monthly

Ways to reduce your insurance costs

Balancing cash flow in the construction industry is tricky, so any chance to minimise costs is welcome. Here are a few ways to reduce your construction business insurance costs: 

• Proactively implement key safety measures and conduct a thorough risk assessment to identify specific risks, understand what cover you need and evaluate your level of exposure.
• Avoiding unnecessary cover – while you want to make sure you’re not underinsured, unnecessary insurance can waste crucial funds.
• Bundling policies – finding providers that can combine various types of cover within one policy to save you money and simplify management.
• Paying upfront to avoid finance fees that come with monthly payments.
• Reviewing cover annually – it’s good practice to reassess things at the end of your policy term, before renewing, as you could find cheaper or better options, plus you may be able to negotiate terms with your existing provider.
• Using brokers to compare deals, as this will save you time, provide expertise and give a better chance of securing the cheapest and most appropriate deal.

How to get accurate construction business insurance quotes

When exploring providers and construction business insurance quotes, be well prepared. Ensure you have the relevant details, a clear view of your risk level and an idea of the likely costs, and what to look out for when choosing an insurance provider.

Insurance providers will typically want to know the following:

• Your turnover
• Subcontractor use
• Type of construction work to be carried out
• Number of employees
• Equipment you have or need (owned or hired)
• Vehicles used
• Health and safety measures you have in place
• Business premises
• Professional services (if any) that you offer

If you’re a new business or you lack in-house expertise, consider using a specialist broker to advise you on the most suitable insurance for your construction business.

Also, when seeking quotes for your construction business insurance, online quotes may be the quick and easy option, but using a broker or getting a bespoke quote from an insurance specialist can give you peace of mind you're getting the best price and most extensive cover. It can enable you to get a more tailored solution (including a combined policy).

Can I take out a loan to pay for business insurance in construction?

Yes. Companies and contractors can use a loan to help with the costs of construction business insurance. You can apply for a secured or unsecured business loan to cover upfront costs, manage cash flow or help you get lower annual rates of various insurance policies.

Research from Premium Credit found that construction firms were the most likely to use credit for covering insurance costs across UK business sectors. And more broadly, 55% of SMEs now use some form of credit to pay for insurance, borrowing an average of £1,080. 

If using a secured loan, construction equipment can be used as collateral to help gain the capital you need and, due to reduced lender risks, you’ll likely enjoy lower interest rates and higher funding amounts. Unsecured loans don’t require assets as security, but you may be required to provide a personal guarantee.

Invoice finance in construction is also commonly used, as project delays and staggered payment schedules can cause cash flow issues. Invoice finance solutions can provide fast access to funds tied up in your projects, releasing working capital for various uses, including covering construction business insurance costs.

Using a loan to cover your construction business insurance premiums

Most insurance policies offer monthly payment plans, including interest. So, why take out a loan, which also involves monthly repayments and interest fees? 

Well, paying for insurance annually can save you a chunk of change on premium finance fees. And if you use a flexible loan provider, like iwoca, you can use the capital to pay for insurance policies upfront and repay the loan early when you’re in a better position. Also, you can draw down funds for insurance, then use the remainder of the loan amount as working capital for various operational needs.

Short-term business loans can help spread the costs of construction business insurance and other project expenditure, including staffing, materials and equipment, without overpaying in fees in the long term. Depending on the loan type and provider, you may enjoy better interest rates on your monthly payments.

Learn more about iwoca’s flexible business loans.

Best practices for choosing small business construction insurance

There’s much to consider when protecting your construction business. So, here’s a quick overview of best practices when choosing small business construction insurance: 

• Consider your unique position and scope out key insurance requirements.
• Map your requirements against the different types of business insurance for construction, defining what’s included and excluded in each policy.
• Assess your current situation and growth plans (including whether you’re going to be recruiting people for your business and projects).
• Do your due diligence and conduct thorough research, examining the track record and claims reputation of prospective insurers.
• Make sure the providers are FCA-authorised and have the right experience and accreditations.
• Leverage cost-saving measures (annual payments, all-in-one policies, etc.)
• Weigh up various pros and cons, including service benefits, rather than just comparing providers on price.
• Consider using a small business loan to cover the costs of business insurance for construction projects.
• Review your coverage annually to determine what’s still relevant, where you have gaps/exposure, and what’s changed as your business grows.

Using iwoca to support your construction business 

Iwoca is a leading business loan provider, offering flexible business finance solutions for UK SMEs. Our Flexi-Loans are designed to meet the needs of growing businesses, with terms tailored to specific requirements and aligned with cash flow. 

From the challenges of lengthy client payment schedules and late invoice payments to cash flow issues, insurance costs and vehicle and equipment investment/upgrades, iwoca can support your various construction business finance needs. 

Here are some of the benefits of iwoca loans at a glance:

• Enjoy easy online applications with minimal documentation.
• Borrow up to £1 million for a few days, weeks or up to 60 months.
• Expect an approval decision within 24 hours, and same-day access to funds for successful applicants.
• Borrow what you need and only pay interest on funds you draw down.
• Repay the loan early (free of charge).

We also offer trade credit for the UK construction industry, helping to fuel growth in the sector.

Find out how to get a business loan with iwoca and use our repayment calculator to get an idea of your likely monthly repayments.

Sources:

• HSE’s Construction Industry Annual Statistics, 2024 [HSE]
• 2024 Property Insurance Payouts [Deloitte]
• HMRC Employers’ Liability Insurance Guidance [Gov.uk]
• Construction Insurance [Simply Business]
• Comparing Construction Business Insurance Quotes [Money Supermarket]
• Construction Sector Borrows Most to Fund Insurance in 2024 [Premium Credit]
• Trade Credit for Construction Made Simple [iwoca]
• What Are Construction Loans, Building Loans & Construction Finance? [iwoca]
• Managing Late Payments in the Construction Industry [iwoca]

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