Insolvency Cover
Safeguard your development against contractor collapse.
What is Insolvency Cover
When you invest in a major construction or renovation project, you want the confidence that it will be completed exactly as planned. But what happens if your main contractor unexpectedly ceases trading before the work is finished?
Insolvency Cover provides a crucial safety net during the active building phase. If your contractor goes out of business mid-project, this cover steps in to protect your initial deposit and fund the additional costs of bringing in a new team to finish the job: ensuring your project doesn’t stall and your community investment remains secure
This comprehensive guide explains:
- The basics
- Key considerations for property owners and developers
- How to select the right cover
If you are actively arranging cover, you can arrange contact with our team at the bottom of this page, or simply send us a few brief pieces of information for a quote.
What Insolvency Cover protects (and what It doesn’t)
This policy is specifically designed for one scenario: the financial failure of your contractor while the build is actively happening.
What is typically covered:
- Loss of Deposit: Reimburses the initial upfront payment you made to the contractor before work began.
- Additional Completion Costs: Funds the inevitable price increase of hiring a brand-new contractor at short notice to take over and finish the exact same scope of works.
What is typically excluded:
- Poor Workmanship: If the builder is still trading but simply doing a bad job, this policy will not step in.
- Contractual Disputes: Disagreements over timelines or design choices are not covered.
- Post-Completion Defects:Issues that arise after the project is finished require Latent Defects Insurance or an Insurance Backed Guarantee (IBG).
What Insolvency Cover protects (and what It doesn’t)
Construction insolvency rates are rising. This policy functions as a financial safety net, providing the necessary capital to appoint a replacement contractor and complete your development without catastrophic delays or loss of funding, ensuring your asset reaches practical completion.
This policy is specifically designed for one scenario: the financial failure of your contractor while the build is actively happening.
Why Insolvency Cover?
Construction insolvency rates are rising. This policy functions as a financial safety net, providing the necessary capital to appoint a replacement contractor and complete your development without catastrophic delays or loss of funding, ensuring your asset reaches practical completion.
Financial Security
☑  Safeguards the project owner from financial losses
☑ Typically covers 10–20% of the contract value
Builds Credibility
☑ Demonstrates the contractor’s financial stability and professionalismÂ
☑ Reassures stakeholders and project investors
Supports Project Continuity
☑  Ensures a backup plan is in place if issues arise
☑ Protects against delays, poor workmanship, or non-completion
Common use cases for an Insurance Backed Guarantee
Important Distinction: An IBG is not a “comprehensive maintenance plan.” It does not cover wear and tear, storm damage, or issues caused by lack of maintenance (e.g., blocked gutters causing leaks).
It strictly mirrors the contractor’s original promise to fix their mistakes.
Roofing
Essential for 10-25 year flat roof warranties.
Timber
A standard mortgage lender requirement for older properties.
Renewables
Technologies that are MCS compliant such as Solar PV and Heat Pumps.
Frequently Asked Questions
Our dedicated IBG specialists have compiled the questions most commonly fielded regarding IBGs and related topics.
No, this policy is specifically triggered if the main contractor officially ceases trading or goes into liquidation before the job is finished. For poor workmanship or contract disputes, you would rely on standard legal resolutions or an Insurance Backed Guarantee (IBG) once the project is finished.
Typically, the policy limit is set at a percentage of your total project value—usually around 10% to 20%. This is carefully calculated to be enough to cover the loss of your initial deposit and fund the increased premium required to hire a brand-new contractor at short notice to take over the site.
You need to arrange Insolvency Cover before the construction work begins. More importantly, it should be in place before you hand over any large upfront deposits to your builder, ensuring your financial commitment is protected from day one.
No. Insolvency Cover is designed exclusively to protect the active construction phase. Once the keys are handed over, you would need to look at Latent Defects Insurance or an IBG for long-term peace of mind in the finished space.
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