Porter Davis serves as a reminder to invest in trades insurance

Why Trades Insurance is More Important Than Ever

The importance of trades insurance in safeguarding businesses cannot be overstated. Trade insurance acts as a risk management tool. Providing financial protection and peace of mind for businesses operating within the construction industry. 

Now more than ever, trade insurance is becoming more important for Australian tradies, as more and more building companies continue to collapse. After Australia’s 13th largest home builder, Porter Davis went into liquidation this year, hundreds of contractors have been left without work. As well as losing work, they were left with thousands of dollars in unpaid work, of which they won’t receive a cent.

The high amount of building company liquidations has only further highlighted the need for insurance. With Porter Davis owing upwards of $71 million dollars in unpaid projects and jobs, which were largely undertaken by contractors. 

As the building industry continues to experience instability, insurance options such as contract works insurance, public liability insurance and professional indemnity insurance are more crucial than ever for safeguarding businesses and individuals alike. 

Understanding the Importance Of Insurance 

Trade insurance is made up of a range of different policies. Most commonly including contract works, builders’ liability, professional indemnity and public liability insurance. These policies are designed to protect tradies from numerous risks, including financial protection should a company collapse or liquidate. 

Contractors, in particular, rely heavily on trade insurance because their unique employment model typically excludes them from receiving benefits like sick leave, worker’s compensation, and superannuation payments. As a result, contractors are often the worst off when companies dissolve or suddenly shut down, making insurance all the more important. Since contractors are usually responsible for securing their own insurance policies, the process can be confusing and frustrating, especially for those unfamiliar with the different types of insurance available. 

Exploring Key Types of Insurance

Understanding the different policies that make up trades insurance is important to decide what policies work best for your needs and what coverage you need to protect yourself within the industry.

Builders Liability Insurance

Builders liability insurance is a specialised insurance policy designed for builders and construction contractors. It provides financial protection against legal liabilities that can result from projects. It offers financial protection against legal disputes that come as a result of your work. Which may include potential financial losses resulting from claims related to construction defects, property damage, or bodily injuries occurring during the construction process.

However, this type of insurance generally doesn’t cover policy holders in instances of faulty workmanship, contractual liability, breach of professional duty or liquidated damages. Meaning that for ultimate protection it is often paired with other policies. 

Professional Indemnity Insurance 

Professional Indemnity Insurance is coverage designed to protect trade professionals from claims arising due to errors, omissions, or professional negligence in the course of their work. It provides financial protection against legal liabilities and associated costs resulting from professional mistakes or failures. 

This insurance offers cover for a range of scenarios, including negligence, errors, legal defense costs and compensation for financial losses. By having this type of coverage, trade professionals can mitigate the financial risks associated with defending against such claims. In the event of a covered claim, the insurance policy supports professionals in navigating legal proceedings, offering financial protection, and helping preserve their professional standing.

Public Liability Insurance

Similar to builders liability insurance, Public Liability Insurance is a type of insurance coverage that protects businesses. Including tradies, against legal liabilities arising from third-party injury or property damage during their business operations. It is particularly relevant to tradies who interact with clients, customers, or members of the public while providing their services. 

Public Liability Insurance enables tradies to respond to claims, cover legal expenses, and provide compensation to injured parties or for property damage. It acts as a safety net, ensuring that tradies can continue their operations with confidence. Knowing they have the necessary protection against unforeseen liabilities and potential legal actions.

Contract Works Insurance

Contract works insurance, is a type of insurance specifically created for the construction industry. It provides coverage for loss or damage to a project during the course of its construction, renovation, or installation.

This policy is generally taken out by builders (see our blog post about what insurance builders need) for the duration of their projects or contracts. Contract works insurance is vital for contractors as it protects you both legally and financially should something happen during the course of a project. 

Policies generally provide protection in the case of physical damage to the project, third party liability, plant and machinery, delay in project completion and advance loss of profits. 

The importance of Contract Works insurance for home builders

Trades Insurance

Insurance options specifically tailored for tradies address the unique needs and risks faced in the construction industry. These options go beyond basic coverage and provide comprehensive protection for tradies and their businesses.

Tradies often operate as independent contractors or small business owners, making them vulnerable to financial challenges when faced with the sudden closure of a business or a lack of work. Insurance for tradies takes into account specific needs and offers coverage that safeguards against income loss, assets, and provides essential support during challenging times.

Sadly, in the case of Porter Davis, it was revealed that the company had never taken out the right insurance policy. Leaving them with no safety net or payout from an insurer. This further highlights the need for insurance at the individual contractual level. Ensuring the financial security for individual hardworking trades people, should a collapse occur. 

Mitigating Risks and Protecting Your Business

Engaging a business insurance broker can help in developing a tailored insurance package for your unique needs. An insurance broker brings expertise and industry knowledge, helping you to identify the most suitable insurance options. With the right policies, building contractors and tradies can improve their risk management practices and better protect themselves within an unstable industry. 


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Daniel Ufer

Daniel is a business insurance broker that specialises in providing tailored advice, competitive premium and risk mitigation tactics to his clients. Daniel has received multiple awards that include: ADVISR Insurance Broker of the Year - Peoples Choice (2nd), ADVISR QLD Insurance Broker of the Year (Finalist), ADVISR Thought Leader (Finalist), APAC Most Dedicated Insurance Broker

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