Contract works insurance: what to sort out before the builders arrive
A new building or an extension can take months, sometimes years, to reach the point where work actually starts. Design, planning permission, funding, tendering, appointing contractors – all of it takes time and attention. Insurance tends to be the last thing anyone thinks about, and often the first thing that catches people out. Insurers accept that day-to-day repairs and maintenance are simply part of owning a property. Major works are a different matter entirely, and they expect to be told about them as early as possible.
In this article, we’ll explain why building work changes your risk overnight, why your contractor’s insurance almost certainly doesn’t cover your existing building, when the contract puts the cover on you, and exactly what your insurer will want to know before work begins.
Why your insurer needs to know before the first brick moves
Work carried out on or near an existing insured structure – or a neighbouring third party’s property – raises the risk of damage or loss significantly. Scaffolding, open roofs, hot works, heavy plant, stored materials and a site full of people who don’t normally work there all change the picture.
If you don’t tell your insurer, cover on the existing building can be severely restricted at exactly the moment you need it. In many cases, additional cover will be needed to keep the property properly protected throughout the works. Either way, it’s a conversation to have before the contractors arrive, not after something goes wrong.
“But the contractor already has insurance”
This is the single most common misconception we come across, and it’s an understandable one. The contractor has confirmed they hold Contractors’ All Risks and Public Liability cover, so surely everything is taken care of?
In most cases, a contractor’s policies cover the new structure they are building, along with their own materials, machinery, hired-in plant, tools and employees. They do not cover your existing building. That distinction matters enormously when something goes wrong.
If your property insurer knows work is under way, they will usually continue to cover the existing structure for the duration. Should the contractor damage the existing building through their own negligence, your property insurer would typically deal with the repair or rebuild first, and may then recover those costs from the contractor’s insurer. If the damage is to the new works in progress, the contractor’s own policy should respond and their insurer picks up the cost directly.
When the contract puts the cover on you
Some contracts require the contracting party – you – to arrange the contract works cover, sometimes in the joint names of you and the contractor. Where that’s the case, it will be clearly stipulated in the contract. If the insurance responsibilities are not clearly set out, have that checked by your legal advisers before you sign anything.
Where you are responsible, it’s customary for your existing property insurer to provide the additional cover, usually as a separate policy. Keeping it with the same insurer means the contract works policy lines up properly with the buildings policy, with no gaps between the two – which is precisely the situation you want to avoid.
Contract works policies can be extended to include tools, machinery and hired-in plant. If the contractor already covers those on their own policy, there’s no need to duplicate it and pay twice.
The other policies in the chain
Contract works cover is one piece of a bigger arrangement. Before work starts, it’s worth confirming that everyone involved is carrying the right protection:
• Contractor’s Employers’ and Public Liability – the contractor should hold both as a matter of course. Ideally, their Public Liability limit of indemnity should be no less than the total rebuilding value of the property at risk, whether it is attached to or simply near the works.
• Architects’ and designers’ Professional Indemnity – covers the situation where a design error on their part leads to additional cost or financial loss. This one is easy to overlook and expensive to be without.
• Joint names arrangements – where the contract requires you and the contractor to be insured together on the same policy.
• Surety bonds – performance bonds, advance payment bonds, and road and sewer bonds may all be stipulated in the contract. If you’re unsure how these affect you, raise them with your legal advisers first.
Setting the right sum insured
When choosing the values to be insured, the sum insured should correspond with the maximum total value of the contract. Getting this wrong is a live risk rather than a theoretical one: rebuild costs for UK houses and flats rose by an average of 4.9% in the year to January 2026, according to the Building Cost Information Service, up from 3.8% the year before – and on the commercial side, Charterfields’ 2025 Insurance Gap Report found 88% of the commercial sites it surveyed were underinsured on buildings.
Figures set even a year or two ago may already be behind where they need to be. On a contract works policy, a shortfall lands directly on you.
What your insurer will ask
If you have a building project on the horizon, tell your broker or insurer as early as you can. Typically, they will want to know:
1. A full description of the proposed works, including the materials to be used.
2. The dates involved.
3. A copy of the plans and designs.
4. Details of the contractors involved, and confirmation that you have checked their insurance. Your broker should be able to provide a suitable Contractors’ Questionnaire, usually completed and returned by the contractor’s own broker.
5. The total value of the works.
6. Whether a separate policy is required – either by you as the contracting party, or in the joint names of you and the contractor.
7. Whether the site will be unoccupied for any period before, during or after the works.
8. Whether the existing building will be closed, remain in use, or be open to the public while work is carried out.
9. What additional security will be in place during the works – fencing, alarms, security patrols and so on.
10. Whether any hazardous materials will be stored or accumulated on site, such as flammables or asbestos.
More questions are always likely, but this is usually enough for insurers to establish whether they can continue to provide full cover on your existing structure, and whether a separate contract works policy will be needed.
One last step people forget
Once the works are complete, increase the cover on the property. The building is now worth more to rebuild than it was before, and a sum insured that made sense in the planning stage will no longer reflect reality. It takes one phone call, and it closes a gap that can sit unnoticed for years.
How L Wood can help
We’ve helped clients through building projects of every size, from single-storey extensions to full commercial developments. We’ll speak to your existing insurer early, check what the contract actually requires of you, review the contractors’ cover through a proper questionnaire rather than a handshake, and make sure the contract works policy sits alongside your buildings policy without gaps. When the work’s finished, we’ll revisit your sums insured so the cover reflects the building you’ve ended up with.
Talk to us
If you have a building project coming up, get in touch before work starts – it’s far easier to arrange properly than to unpick afterwards. Call us on 01274 515747, email mail@lwood.co.uk, or drop by. We’re here Monday to Friday, 8:30am to 5pm.