Understanding the Key Differences for Builders and Contractors
If you’re involved in construction in Australia, whether you’re a solo tradie, small builder, or commercial contractor, understanding your insurance needs is essential. Two policies often mentioned in conjunction are construction works insurance and public liability insurance. While both are vital to managing risk, they serve very different purposes.
In this blog, we’ll explore the core differences between these two insurance types, what they cover, and how builders can choose the right protection for their projects and business.
What Is Construction Works Insurance?
Construction works insurance, sometimes called contract works insurance, is designed to protect a building or construction project while it’s being built. It can be taken out by builders, developers, or property owners and typically covers accidental damage or loss during the construction period.
What it covers:
- Physical damage to the construction project from events like fire, storm, flood, theft, or vandalism
- Loss or damage to building materials and equipment on site
- Contractual obligations under a construction agreement
- Optional cover for tools and mobile plant/equipment
- Coverage for subcontractor work (when specified)
Real-World Example:
Imagine a new home under construction is damaged by a storm before the roof is installed. Without construction works insurance, the builder would be responsible for the cost of repairs. With the right policy, the damage would likely be covered, helping avoid financial loss and delays.
What Is Public Liability Insurance?
Public liability insurance protects your business against legal costs and compensation claims made by third parties for injury or property damage caused by your business activities.
This is a must-have for any construction business — from builders and carpenters to electricians and concreters, especially those working on client sites.
What it covers:
- Injury to members of the public (e.g. a site visitor tripping over equipment)
- Damage to third-party property (e.g. concrete accidentally damaging a driveway)
- Legal fees, settlement costs, and court-awarded damages
- Optional products liability for manufactured or installed items
Real-World Example:
You’re pouring concrete at a site, and your equipment accidentally damages a neighbour’s fence. Public liability insurance may cover the cost of repairs and any legal proceedings that follow.
Key Differences at a Glance
While both construction works insurance and public liability insurance are essential for builders and contractors, they serve very different purposes.
Construction works insurance — also known as contract works insurance — is designed to protect the actual construction project, materials, and site infrastructure during the build. It typically responds to losses from physical damage such as storms, theft, or fire, affecting the building under construction. It also offers cover for materials onsite and may extend to subcontractor work and equipment.
On the other hand, public liability insurance protects your business from legal claims if a third party suffers injury or property damage due to your business operations. This could include a passerby injured by falling scaffolding or damage caused to a neighbouring property during a build. It covers legal fees, compensation costs, and court-awarded damages.
Another key difference lies in who the policy is designed to protect. Construction works insurance protects the investment in the build, covering losses to the physical structure. In contrast, public liability insurance protects your business from third-party claims and legal liability risks.
Timing is also a factor. Construction works insurance is generally active for the duration of a specific project, whereas public liability insurance is continuous and should be in place year-round as long as you’re conducting business operations.
Ultimately, having both types of insurance ensures you’re covered from risks on-site and in the community, offering comprehensive protection for builders and contractors across Australia.
Do You Need Both Types of Insurance?
In short, yes. These policies work together to provide holistic protection for your construction business.
- Construction works insurance protects the work itself.
- Public liability insurance protects your interactions with others.
Without both, you may be exposed to significant gaps in coverage, especially if a claim arises during an active project.
Insurance Requirements in Australian Construction
Depending on your role and the location of your projects, some forms of insurance may be legally required or mandated by contract. For example:
- Builders may be contractually required to carry contract works insurance before commencing work.
- Public liability cover is typically mandatory on government or council contracts.
- Licensing bodies and regulators (e.g. VBA) often expect tradespeople to have adequate liability coverage.
For Victorian plumbers, refer to VBA Plumbing Insurance Requirements to understand the minimum insurance requirements in your sector.
How to Choose the Right Insurance Policy
When deciding on your construction insurance, consider:
- Project value and duration: Larger, longer-term projects may benefit from extended contract works cover.
- Business activities: If you interact with the public, clients, or subcontractors, liability insurance is non-negotiable.
- Subcontractors: Ensure your policy covers liability for their work if they’re engaged under your contract.
- Tool and equipment cover: If your tools are high-value or essential, add optional portable equipment coverage.
Working With a Trusted Insurance Broker
Choosing a policy isn’t just about price, it’s about getting the right protection. That’s why working with a broker like Atlantic Insurance makes sense. We’ll help you:
- Compare policy options across reputable insurers
- Tailor construction and public liability insurance to your business
- Understand key exclusions and policy limits
- Support you during the claims process
Speak to a Specialist in Construction Insurance.
Conclusion: Build With Confidence
Construction is a high-risk industry, and unexpected events can quickly derail a project or damage your reputation. With the right combination of construction works insurance and public liability insurance, you’ll have peace of mind knowing that your project and your business are protected.
Don’t leave it to chance. Get advice tailored to your trade, project size, and risk profile.
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Any information contained on this page of the website is general advice only and has been prepared without taking into account your objectives, financial situation or needs. You should consider these, having regard to the appropriateness of this advice and the relevant Product Disclosure Statement (‘PDS’), Target Market Determination (‘TMD’) and Financial Services Guide (‘FSG’), which will be provided following any formal recommendation to you.