Project Insurance
Contractors’ All Risk (CAR) Insurance
Contractors’ All Risk (CAR) Insurance is a comprehensive insurance policy designed to protect construction projects against a wide range of risks. It covers physical damage to the construction site, materials, equipment, and third-party liability. This policy is typically purchased by contractors, developers, and project owners to ensure smooth project execution without financial setbacks from unexpected losses.
Why is Contractors’ All Risk (CAR) Insurance Essential?
- Protection Against Project Delays & Financial Losses
- Ensures Business Continuity
- Covers Third-Party Liabilities
- Compliance with Contractual Obligations
- Covers Expensive Machinery & Equipment
Important Things You Should Note
- Applicable for All Types of Construction Projects – Covers residential, commercial, industrial, roads, bridges, tunnels, and infrastructure projects.
- Policy Duration Matches Project Timeline – Coverage extends from project initiation to completion and sometimes includes a maintenance period.
- Dual Coverage (Material Damage & Third-Party Liability) – Unlike standard property insurance, CAR insurance covers both site damages and liability claims.
- Contractor & Principal Named in the Policy – Both the contractor and project owner can be covered under one policy.
- Customizable Coverage – Can include extensions like removal of debris, earthquake coverage, and additional insured parties.
What is Covered & What is Not Covered?
What is Covered?
- Material Damage – Covers construction site damages from fire, flood, storm, earthquake, theft, or vandalism.
- Third-Party Liability – Covers bodily injury or property damage caused to third parties.
- Temporary Structures – Covers damage to scaffolding, formwork, and on-site temporary buildings.
- Machinery Breakdown – Provides financial compensation for damages to construction equipment.
- Debris Removal – Covers the cost of clearing debris after an insured event.
What is Not Covered? (Exclusions)
- Faulty Design & Defective Workmanship – Any defect due to poor construction quality is excluded.
- Normal Wear & Tear – Gradual deterioration of materials due to aging is not covered.
- Willful Negligence or Fraud – If damages occur due to intentional misconduct, the claim is denied.
- War, Terrorism & Nuclear Risks – Damages caused by war, nuclear radiation, or terrorist acts are excluded unless added as an extension.
- Penalties & Fines – Does not cover contractual penalties or liquidated damages due to project delays.
Frequently Asked Questions (FAQs)
Who should purchase Contractors’ All Risk (CAR) Insurance
CAR insurance is ideal for contractors, subcontractors, project owners, developers, engineering firms, and construction companies.
How is CAR insurance different from Property Insurance?
Property Insurance covers fixed assets, whereas CAR Insurance covers construction projects in progress.
Can CAR Insurance be extended beyond the construction period?
Yes! It can be extended to include a maintenance period where the contractor is responsible for defects.
Does CAR Insurance cover subcontractors?
Yes! Subcontractors can be included under the policy, depending on the contract terms.
Is natural disaster damage covered under CAR Insurance?
Yes! Events like earthquakes, floods, storms, and cyclones can be covered if included in the policy.
Contractors’ All Risk (CAR) vs. Erection All Risk (EAR) Insurance
| Feature | Contractors’ All Risk (CAR) Insurance | Erection All Risk (EAR) Insurance |
|---|---|---|
|
Purpose |
Covers civil engineering works under construction |
Covers mechanical and electrical works during erection and installation |
|
Commonly Purchased By |
Civil contractors, builders, developers |
Plant installation contractors, equipment manufacturers, EPC contractors |
|
Type of Projects Covered |
Roads, bridges, residential/commercial buildings, dams, tunnels, etc. |
Power plants, turbines, transformers, boilers, manufacturing units, etc. |
|
Main Risk Covered |
Damage to works under construction, materials, and equipment due to accidents, natural calamities, etc. |
Power plants, turbines, transformers, boilers, manufacturing units, etc. |
|
Period of Coverage |
From the start of the civil work till project completion |
From start of machinery erection to testing and commissioning completion |
|
Key Extensions |
Third-party liability, debris removal, escalation, surrounding property, cross liability |
Third-party liability, surrounding property, express freight, customs duty, testing phase |
|
Testing Period Coverage |
Usually not covered or covered to a limited extent |
Covered extensively, especially during cold and hot testing phases |
|
Key Exclusions |
Normal wear and tear, faulty design/material, war, wilful negligence |
Same as CAR, plus exclusions related to operational failures after testing |
|
Premium Basis |
Based on contract value, project location, nature of work |
Based on value of machinery, erection complexity, location, testing period |
|
Ideal for |
Civil construction projects without major mechanical installations |
Industrial, mechanical, and power projects involving significant machinery erection |
