What is contract works insurance?

How it works in Ireland

A house under construction is not covered by ordinary home insurance, and it is not yet worth what it will be when finished. Contract works cover fills that gap. It pays to repair or rebuild the works as they stand, plus materials on site and sometimes machinery and equipment, after an insured event.

The sum insured should be the full cost of rebuilding the works at any stage, not just the money spent so far. Include materials you buy yourself and labour you do not pay for in cash. Ask whether the policy adds an automatic uplift as costs rise during the build, and when you must review the figure.

Policies usually carry exclusions and excesses. Theft of materials left unsecured, faulty design or workmanship, and damage from water or frost can be excluded or attract a higher excess. Materials held at a supplier, such as a timber kit, may not be covered until they reach your site. If the project includes an existing building, keep its home insurance in place and tell that insurer about the work.

If a lender is paying for the build in stages, its letter of offer will usually set conditions for site insurance, and cover may need to be in place before the first payment. Ask your broker to confirm in writing that the policy meets those conditions.

Contract works cover protects the works. It does not pay for injury to other people, which is public liability, or for injury to people who work for you, which is employers’ liability. Names differ between insurers and one policy often bundles several covers, so compare what each one pays for rather than what it is called.

A common mistake

Insuring for the contract price instead of the rebuild cost. If you supply materials or do some of the work yourself, the contract price leaves them out. If the sum insured is less than the full cost to rebuild, the insurer may reduce a part-loss payment in proportion. Give your broker the whole budget, including what you supply.