Construction professional indemnity insurance
Professional indemnity (PI) insurance for builders, contractors, design and build firms and construction professionals, for claims that a design error, a wrong specification or poor advice caused a client a loss.
What is construction professional indemnity insurance?
Construction professional indemnity (PI) insurance covers claims from a client that a mistake in your design, specification or advice caused them a financial loss. It usually pays the compensation you're legally liable for and the legal costs of defending the claim, up to the limit on your policy.
It matters to builders and contractors as well as architects and engineers, because design responsibility often sits with the contractor. If you design or specify any part of the work, choose materials, or take on a design and build contract, a client may hold you responsible for a design fault even if someone else drew it. It's also known as design and construct PI.
PIB Insurance Brokers arranges construction PI for builders, contractors, specialist subcontractors and construction professionals. For design-only practices, see our architects and engineers insurance and surveyors professional indemnity insurance pages, or our main professional indemnity insurance page.
What does professional indemnity insurance cover in construction?
Policies vary, but construction PI usually responds to claims that you breached your professional duty in the design, specification or advice you gave. The summaries below are general examples of what may be covered in each section; your policy schedule and wording decide what is and isn't covered in any claim.
Design errors
Claims that a design you or your subcontracted designer produced was wrong, such as a beam sized incorrectly or drainage that doesn't work as designed.
Watch for: Designers you appoint should have their own PI. Check your policy covers design you subcontract.
Wrong specification
Claims that you specified the wrong product, material or system for the job, such as a membrane unsuitable for the conditions.
Watch for: Claims about materials that are simply faulty, which are usually a supplier or product liability matter.
Negligent advice
Claims that your advice on buildability, cost or programme was wrong and the client lost money relying on it.
Watch for: Advice outside the business activities described on your policy.
Legal and defence costs
The cost of defending a claim, including experts and solicitors, whether or not the claim succeeds. These usually count towards your limit, so check how your policy treats them.
Watch for: Costs you run up before telling your insurer. Policies usually need you to report possible claims promptly.
What construction PI usually doesn't cover
- Poor workmanship: work that isn't built to the design is usually a matter for public liability or contractors all risk, not PI.
- Damage to the works during the contract: this is usually covered by contractors all risk insurance.
- Injury and property damage from your site work: these are usually covered by public and employers' liability.
- Fitness for purpose promises: contracts that make you guarantee a result, rather than use reasonable skill and care, are often excluded or limited.
- Known problems: claims or circumstances you knew about before the policy started are usually excluded.
Who needs construction professional indemnity insurance?
Professional indemnity insurance isn't usually a legal requirement for construction businesses. You're more likely to need it if you:
- design or specify any part of the work, even a small part
- take on design and build or design and construct contracts
- appoint architects, engineers or other designers as subcontractors
- give advice a client relies on, such as on buildability, value engineering or cost
- are asked for PI in a contract, appointment or collateral warranty.
Businesses that often hold construction PI include builders and main contractors, electrical contractors, mechanical and heating contractors, cladding and fire protection contractors, specialist subcontractors with design responsibility, and construction consultants.
What is design and construct professional indemnity insurance?
Design and construct (or design and build) PI covers contractors who take on responsibility for design as well as building. When you design and build, the client usually comes to you if there's a design problem, even if a subcontracted designer made the mistake. You may be able to recover the cost from that designer, but it may take time and money and isn't guaranteed.
A design and construct policy covers the cost of defending and settling design-related claims against you, up to the policy limit. Some policies also include, or offer separately, contractor's protective PI.
Contractor's protective PI: sometimes called owner's protective PI, this is a separate cover that may respond when a designer you've appointed is at fault but their own PI doesn't pay, for example because it has lapsed or its limit has been used up. Terms vary a lot between insurers, and it usually sits above the designer's own cover.
Professional indemnity, public liability and contractors all risk
These covers are often confused because they all deal with things going wrong on a project. They respond to different problems, and many construction businesses need more than one.
Professional indemnity
Financial loss caused by a mistake in your design, specification or advice.
Example: A floor you designed isn't strong enough for its intended use, and the client pays for remedial work.
Public liability
Injury to other people, or damage to their property, caused by your work.
Example: A passer-by is hurt by falling materials, or you damage a neighbour's wall.
Contractors all risk
Damage to the works, materials and plant during the contract.
Example: A fire or flood damages a partly built extension.
Employers' liability
Injury or illness to your employees. Usually required by law if you employ staff.
Example: An employee is hurt falling from a scaffold.
Terms to check on a construction PI policy
- Claims-made basis: PI usually covers claims made while the policy is in force, not when the work was done. Keep cover in place, or buy run-off cover, after you stop trading or retire.
- Retroactive date: the policy may not cover work carried out before this date. Check it when you change insurer.
- Each and every claim or aggregate: some limits apply to each claim, others to all claims in the policy year. Contracts and collateral warranties often ask for a limit on an each and every claim basis.
- Exclusions for higher-risk work: cladding, fire safety, basements and structural work may be excluded or restricted, so check they're covered if you do them.
- Collateral warranties: if you give warranties to funders, purchasers or tenants, check your PI responds to claims under them.
What affects the cost?
- The work you do: how much design responsibility you take on, and whether you do higher-risk work such as cladding, fire safety or structural work.
- Your turnover or fees: this gives the insurer a measure of how much work you do.
- The limit and basis you choose: a higher limit, or a limit on an each and every claim basis, usually costs more.
- Your contract terms: fitness for purpose wording, long liability periods and collateral warranties may affect price and availability.
- Your claims record: insurers usually look at the last five years.
The market: since the Grenfell Tower fire, insurers have been more cautious about some construction PI, particularly cladding and fire safety work, with some adding exclusions or reducing limits. Terms vary between insurers, so starting your renewal early gives more time to compare them.
Why work with PIB Insurance Brokers
We check the design responsibility you carry
We look at what you design, specify or subcontract, so the cover matches the work you really do.
We check your contracts and warranties
The PI limit, basis and any fitness for purpose wording asked for in appointments and collateral warranties, before you sign where you ask us to.
We go to insurers that write construction PI
Including insurers that consider basement, fire and cladding work, and we set out the differences in cover, not just price.
Here when things change
Our team is on hand throughout the policy year for advice, whether your circumstances change or you're not sure what to do next.
What our clients say
Reviews from PIB Insurance Brokers clients across the sectors we work with, collected by Reviews.io.
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Get a quoteFrequently asked questions
What is professional indemnity insurance in construction?
It's insurance for claims that a mistake in your design, specification or advice caused a client a financial loss. It usually pays the compensation you're legally liable for and the costs of defending the claim, up to your policy limit. In construction it's often called design and construct PI, because contractors who take on design responsibility need it as well as architects and engineers.
Do builders need professional indemnity insurance?
It isn't a legal requirement. Builders usually need it if they design or specify any part of the work, take on design and build contracts, appoint designers as subcontractors, or give advice a client relies on. Many contracts, appointments and collateral warranties also ask contractors to hold PI at a stated limit. Builders who only build to someone else's design may not need it, but should check their contracts.
What does professional indemnity insurance cover in construction?
It usually covers claims that you breached your professional duty through a design error, a wrong specification or negligent advice, and the legal costs of defending those claims. It doesn't usually cover poor workmanship, damage to the works during the contract, or injury and property damage from your site work. Those are usually covered by public liability, contractors all risk and employers' liability.
Is contract works insurance the same as professional indemnity?
No. Contract works insurance, often part of contractors all risk, covers physical damage to the works, materials and plant during the contract, for example from fire, flood or theft. Professional indemnity covers claims that a mistake in your design, specification or advice caused a client a financial loss. Many contractors need both.
What is contractor's protective professional indemnity insurance?
Also called owner's protective PI, it's a cover that may respond when a designer you've appointed is at fault but their own professional indemnity insurance doesn't pay, for example because it has lapsed or its limit has been used up. It usually sits above the designer's own cover, and terms vary between insurers.