Insurance for a new design and build contractor

Two exposures, and why they need different policies

The contracting side is physical. Someone is injured, a neighbouring property is damaged, a service is struck, the works are damaged by fire or flood before handover, plant is stolen, a subcontractor causes any of the above. These are the risks a general contractor has always carried, answered by public liability, employers’ liability and cover for the works and plant.

The design side is financial. The building goes up exactly as drawn and the drawing was wrong. The specification does not meet a performance requirement. A detail does not perform in use. The remedy is money and the claim is about your judgement rather than your workmanship — professional indemnity territory, and the half a new contractor is most likely to leave uninsured without realising.

The line is not always tidy, which is why both need to be in place: a design error that causes a structure to fail produces physical damage and economic loss in the same event.

Why design is the part that catches people out

A contractors’ combined policy is built around the physical risks. Where it mentions design at all, it is usually to exclude liability arising from design, or to give back a narrow extension for design incidental to the works. A design and build contractor is not doing incidental design. Design is the point of the procurement route.

So the question for a broker is not “does this include design?” but “does this wording match the design responsibility I take on under my contracts?” If you novate a designer, accept a performance specification, or take an employer’s requirements document that leaves the how to you, you have accepted design responsibility whether or not anyone in your office draws anything.

Subcontracting the design does not remove the exposure either. Under most design and build arrangements the contractor remains responsible to the employer for the whole of the design, including the parts a specialist carried out. It gives you someone to pass the claim to — but only if that firm carries its own professional indemnity at an adequate limit and keeps it running after the job ends. Collecting and diarising those certificates is one of the highest-value things a small contractor can do.

What cover a new design and build contractor typically needs

Public liability. Injury to third parties and damage to their property. Contracts set the limit, and building contracts frequently specify £5m or £10m rather than the lower limits common elsewhere.

Employers’ liability. Required by law for almost every UK employer under the Employers’ Liability (Compulsory Insurance) Act 1969, at a minimum of at least £5m, with the certificate available to employees. Labour-only subcontractors are commonly treated as employees for this purpose, so a contractor with no payroll can still need it.

Professional indemnity written for design and construct — not an incidental design extension. Check the retroactive date, whether the limit is any-one-claim or in the aggregate, and how the wording treats the cost of rectifying the design itself as against the consequences of it.

Cover for the works. Contract works or contractors’ all risks responds to damage to what you are building before handover, along with materials on site and usually your own and hired-in plant. Contractors’ all risks is explained here. Hired-in plant is a contractual liability as well as an asset, on terms the hire agreement wrote for you.

What contracts require

Standard building contracts are explicit about insurance. A design and build appointment will normally require you to maintain professional indemnity cover of a stated amount, on an any-one-claim or aggregate basis as specified, for a stated number of years after practical completion, provided it remains available at commercially reasonable rates. Read that period carefully: it is a genuine cost of the job. The contract will also say who insures the works themselves — standard forms offer alternatives depending on whether the project is new build or work to an existing structure.

The standard of care is the clause that matters most for insurability. Professional indemnity responds to a failure to exercise reasonable skill and care; it is not a performance guarantee. Where a contract imposes a fitness for purpose obligation, or warrants that a design “will achieve” a stated outcome, that obligation can fall outside the policy entirely and you carry the whole of it. The 2024 edition of the JCT Design and Build Contract added express wording that the contractor has no greater duty in respect of design than to exercise reasonable skill and care, and is not subject to any duty that the design shall be fit for purpose — which shows how seriously the industry takes the point. The distinction is set out here.

Expect to be asked for collateral warranties or third party rights in favour of the employer’s funder, purchaser or tenants: they widen the group of people who can bring a claim against you, so they belong in the same conversation as the limit. See net contribution clauses and joint and several liability. Where a project involves a higher-risk building, the Building Safety Act regime sits over all of it — see the Building Safety Act and professional indemnity and the principal designer role.

What an underwriter wants to see from a contractor with no trading history

The work you intend to take on — sector, project type, typical and maximum contract value, and how much is new build against work to occupied buildings. Contract value matters more than turnover, because a single large job concentrates the exposure.

How much design you are taking, and who does it — in house, novated, or subcontracted to specialists, and if subcontracted, whether those firms carry their own professional indemnity and at what limit. Whether you work on standard contract forms, and whether you accept amendments, belongs here too.

The team. Where the directors and key staff worked before, on what projects and at what scale, and what qualifications they hold. In construction this carries real weight and stands in for a trading history.

Subcontractor management, and anything in the restricted areas — cladding and external wall systems, fire safety work, structural work to existing buildings, basements, underpinning, demolition and work at height. Many wordings apply conditions or restrictions there, so raise them at the outset rather than at renewal. Claims and circumstances, including anything attaching to the directors personally, belong on the form too.

Getting cover in place before the first job

Design liability starts when the design starts, which on a design and build job is well before anyone is on site. Because professional indemnity is claims-made and carries a retroactive date, the policy needs to be in force before you begin design work, not before you begin building. Tender-stage design is design.

Construction claims also arrive late. A defect can surface years after practical completion, and it is the policy in force when the claim is made that answers it — which is why letting cover lapse in a quiet year is one of the more damaging things a small contractor can do. What to notify, and when is worth reading before you need it. Most employers want evidence of public liability, employers’ liability and professional indemnity before you start, so get quotes in place while you are tendering rather than in the week you are due on site.

Frequently asked questions

Does a contractors’ policy cover design work?

Frequently not. Contractors’ combined policies are built for the physical risks and commonly exclude liability arising from design, or give back only a narrow extension for design incidental to the works. Check the wording rather than assume.

I subcontract all my design. Do I still need professional indemnity?

Yes. You normally remain responsible to the employer for the whole of the design, including the parts a specialist carried out. Subcontracting gives you a route to pass the claim on, but only if that firm keeps its own cover in force at an adequate limit.

Why does fitness for purpose matter so much?

Because professional indemnity responds to a failure to exercise reasonable skill and care, not to a guarantee of outcome. A fitness for purpose obligation can sit outside the policy and leave the contractor carrying it in full. Negotiate it before signature.

How long do I need professional indemnity after a job finishes?

As long as your contracts require, and as long as a claim could realistically be brought. Because the cover is claims-made, stopping earlier means a late claim about that job has no policy to answer it.

I use labour-only subcontractors, not employees. Do I need employers’ liability?

Very probably. Labour-only subcontractors working under your direction are commonly treated as employees for the compulsory insurance requirement. It turns on the working relationship rather than the invoice, so confirm before the first shift.

Related reading: Insurance for a new business · Contractors’ all risks · Building Safety Act and PI · PI vs public liability · Cover before you start trading

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.