Construction Subcontractor Insurance Guide

If you work as a subcontractor in the construction industry, having the right insurance isn't just good practice — for some types of cover, it's a legal requirement. Beyond legal obligations, the right insurance protects you from claims that could wipe out your business overnight. A single injury on site, a piece of damaged property, or a defective installation can lead to claims running into tens or even hundreds of thousands of pounds.

I'm Penny, your AI bookkeeper at Accounted, and while insurance advice is ultimately a matter for a qualified broker, understanding what cover you need and why is essential for running a protected construction business.

Public Liability Insurance

Public liability insurance covers you against claims from members of the public (including clients and their visitors) who suffer injury or property damage as a result of your work. In construction, the risks are inherently higher than in most other industries — heavy materials, power tools, working at height, and the physical transformation of properties all create situations where things can go wrong.

While public liability insurance isn't a legal requirement for sole traders, it is effectively mandatory in practice. Most main contractors require subcontractors to hold a minimum level of public liability cover — typically £1 million, £2 million, or £5 million — before they'll allow you on site. Many clients also require evidence of cover before engaging you.

The cost of public liability insurance varies depending on your trade, turnover, number of employees, and claims history. As a rough guide, a sole trader electrician or plumber might pay between £150 and £400 per year for £2 million of cover, while a subcontractor doing structural work or demolition could pay significantly more due to the higher risk profile.

When choosing a policy, pay attention to the excess (the amount you pay towards each claim), any exclusions (some policies exclude certain types of work), and whether the policy covers you for work done in the past (known as retroactive cover) as well as current work.

Our guide on business insurance for sole traders covers public liability and other types of insurance in broader terms that apply across industries.

Employer's Liability Insurance

If you employ anyone — including casual labour, apprentices, or temporary workers — you are legally required to have employer's liability insurance. This is not optional. The Employers' Liability (Compulsory Insurance) Act 1969 requires every employer to hold at least £5 million of cover, though most policies provide £10 million as standard.

Employer's liability insurance covers you against claims from employees who are injured or become ill as a result of their work. In construction, where workplace injuries are more common than in most sectors, this cover is essential.

The penalty for not having employer's liability insurance when you're required to is up to £2,500 for every day you're uninsured. You must also display your certificate of insurance (or make it available electronically) where your employees can see it.

Even if you consider yourself a "one-man band," think carefully about whether anyone who works with you could be classified as an employee. HMRC and the courts use various tests to determine employment status, and someone you consider a self-employed helper might legally be your employee. If in doubt, get employer's liability insurance anyway — the cost is modest relative to the risk.

HMRC and the Health and Safety Executive provide guidance on employer's liability requirements. The HSE's employer's liability insurance page explains who needs cover and what the minimum requirements are.

Professional Indemnity Insurance

Professional indemnity insurance covers you against claims arising from professional advice, design work, or services you provide. In construction, this is most relevant to subcontractors who carry out design work (architects, structural engineers, building designers), provide specifications or technical advice, or certify that work meets certain standards.

If your work is purely hands-on with no design or advisory element, you may not need professional indemnity insurance. However, the line can be blurry. If a client asks for your recommendation on materials, layouts, or methods, and they rely on your advice, you could face a professional indemnity claim if things go wrong.

Professional indemnity claims in construction can be very expensive because they often involve the cost of rectifying defective design work, which can require demolition and rebuilding. Cover levels of £250,000 to £1 million are common, but larger projects may require higher limits.

Many trade bodies and professional associations require members to hold professional indemnity insurance as a condition of membership. If you're a member of a professional body, check their requirements.

Contractor's All Risks Insurance

Contractor's all risks (CAR) insurance covers physical loss of or damage to the contract works, including materials, equipment, and temporary works. It protects you if the work you've done is damaged by fire, storm, flood, theft, vandalism, or accidental damage before it's handed over to the client.

For main contractors, CAR insurance is standard. For subcontractors, the position varies. Sometimes the main contractor's CAR policy covers the subcontractor's work, but sometimes it doesn't — or it covers the work but not the subcontractor's liability for re-doing it. Check with the main contractor to understand what their policy covers and where the gaps are.

If you're working directly for a homeowner or property owner (rather than under a main contractor), you should seriously consider CAR insurance. If a storm damages the extension you're building before it's completed, who pays for the repair? Without CAR insurance, it could be you.

Tools and Equipment Insurance

Your tools are your livelihood. If they're stolen, damaged, or destroyed, you can't work — and replacing a full set of professional tools can cost thousands of pounds. Tools and equipment insurance (sometimes called tool cover or plant insurance) protects against theft, accidental damage, and sometimes loss.

Standard policies typically cover tools stored in your vehicle, on site, and at your home. Look for policies that cover tools left in a locked vehicle overnight, as this is a common exclusion that catches people out. Theft from vehicles is one of the most frequent claims in the construction industry, so insurers often impose specific security requirements.

Cover levels should reflect the full replacement cost of your tools and equipment. It's worth creating an inventory with photographs and approximate values, both for insurance purposes and for your general records. Update this whenever you buy new tools.

For more on managing your business assets and their costs, see our article on capital allowances and annual investment.

How Much Does Construction Insurance Cost?

The total cost of insurance for a construction subcontractor varies widely depending on your trade, but here are some indicative annual figures for a sole trader.

Public liability (£2 million cover): £150 to £500. Employer's liability (if needed, £10 million cover): £100 to £400. Professional indemnity (if needed, £500,000 cover): £200 to £600. Tools insurance (£5,000 cover): £80 to £200. Contractor's all risks (project-dependent): varies widely.

A typical sole trader subcontractor doing general building work might spend £400 to £800 per year on insurance. This is a legitimate business expense that's fully deductible against your profits for tax purposes.

You can often reduce costs by bundling multiple types of cover with a single insurer, choosing higher excess levels (if you can afford to absorb small claims), maintaining a clean claims history, and being a member of relevant trade bodies or holding recognised qualifications.

Making Insurance Premiums Work for You

The government provides guidance on workplace safety responsibilities which may also affect your insurance requirements. Insurance premiums are an allowable business expense, so they reduce your taxable profit. If you pay your premiums annually, the full amount is deductible in the year of payment (on cash basis accounting). Record each payment properly in your bookkeeping system so the deduction isn't missed.

Accounted makes it easy to categorise insurance payments as business expenses and track them throughout the year. If you're a construction subcontractor looking to keep all your finances — including CIS deductions, expenses, and insurance costs — in one place, check out our pricing and see how Accounted can support your business.

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