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Contractor's All Risk Policy

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What Is

Contractor’s All Risk Policy?

A contractor's all risk insurance policy, also known as CAR insurance, is like a safety net for construction projects. It protects against unexpected problems and covers things like damage to construction equipment, machinery, as well as third-party claims arising from bodily injury and property damage. This insurance is important because it helps keep construction projects on track and prevents financial losses, making sure they finish on time and within budget.

Features of Contractor’s All Risk Policy

Insurance coverage is applicable for civil engineering projects where the value of civil works is more than 50% of the total contract value.

It operates during storage, erection/construction till completion.

Loss, damage, or destruction of property incurred due to any cause other than those excluded in the policy is covered.

It is widely demanded by construction firms and financiers involved in construction projects.

Who Needs

Contractor’s All Risk Policy?

The contractor’s all risk insurance can be availed by those who are involved in any way in the construction business such as:

Contractors
Purchaser or owner
Companies financing the project
Firms commissioned to carry out the work, including subcontractors

You can also cover all participants under a single insurance contract for the whole project to avoid gaps in coverage.

Why Get

Contractor’s All Risk Policy?

The contractor's all risk policy is a special type of insurance that helps protect construction workers from the unfortunate event of damage or destruction to their projects. It covers everything from small projects like offices, buildings, hospitals, and shopping complexes, to larger projects such as highways, dams, and tunnels. This policy provides coverage for accidental damage to the projects themselves, as well as any equipment or machinery owned by the contractors. In simple terms, it ensures that if something goes wrong during construction, the insurance will help cover the costs of repairs or replacements.

Coverages & Exclusions in

Contractor’s All Risk Policy

CoveragesExclusions

Here are the common elements that are typically covered in a CAR policy in India

Construction Material Damage

It provides protection from physical loss or damage to construction materials and equipment used in the construction process due to a covered peril. It may also cover the cost of demolition and removal of damaged materials and cleanup of debris.

Third-party Liability

Under this policy, the insured is protected from legal liability for accidental damage or loss to a third party's property arising from construction work. It also covers the legal liability for non-fatal and fatal injuries caused to a third person due to the construction of the property

Negligence and Human Errors

CAR insurance policies often include coverage for loss originating from negligence and errors in the design, planning, or supervision of the construction project. If negligence or human errors result in third-party injuries or property damage, a CAR insurance policy may provide coverage for liability claims as well. This includes legal defense costs and any settlements or judgments against the insured party due to their negligence or errors.

Water Damage

A CAR insurance policy typically covers accidental water damage that occurs during the construction process. The policy may provide coverage for the resulting damage to the insured property or construction materials. It may also cover loss or damage arising from the entry of water into the construction site or the insured property due to heavy rainfall, storms, or other external factors.

Collapse

A CAR insurance policy covers both partial and total collapse of the insured structure during the construction phase. The policy will provide coverage for the repair or reconstruction costs associated with the collapse, up to the policy limits and deductibles.

Faults in Construction

This coverage can be provided as an extension or add-on cover. If a fault occurs due to design or engineering errors, resulting in damage or loss, a CAR insurance policy may provide coverage.

Fire, Explosion, Lightning, and Aircraft Damage

This cover refers to the protection provided for losses or damage that occur at the construction site, because of these specific perils. It includes damage to the construction site, materials, equipment, and structures due to fire-related incidents and explosions. This may be caused by factors such as gas leaks and chemical reactions, damage due to lightning-induced fires, electrical surges, and incidents where aircraft collide with the construction site, equipment, or structures, causing damage or destruction. The policy will cover the cost of repairing or replacing the damaged property.

Storms, Floods, Cyclones, Earthquakes, and Allied Perils

A CAR insurance policy generally covers losses or damages to the construction site, materials, equipment, or structures resulting from storms, overflowing rivers, heavy rainfall, or other flood-related events, cyclonic events, tremors, other earthquake-related factors, and other related perils. It may also provide coverage for the cost of repairs, reconstruction, or replacement necessitated by the covered perils mentioned above.

Add-on Coverage

Fire and allied perils
Collapse
Earthquake, shock, and fire
Faults in construction
Storms, floods, cyclones, and tempests
Negligence and human errors
Water damage

Contractor’s All Risk Policy Examples

Repairing Cost Claim for Flood Damaged Property

Incident

Let us suppose a construction company has undertaken a project to build a residential complex. A flood occurs during the construction phase and the floodwaters have caused significant damage to the construction site, including partially built structures, materials, equipment, and other property involved in the project.

Resolution

If the company has obtained a CAR insurance policy to protect its project from various risks, including flood damage, the policy would reimburse the insured company for the cost of repairing the damaged property. It would also provide coverage for debris removal expenses, which would help the contractor bear the cost of clearing and disposing of debris caused by the flood.

About Contractor’s All Risk Policy

Who can purchase the contractor’s all risk insurance?

What is the method of calculating risk used by insurance companies?

How do I claim a contractor's all risk policy?

Is it mandatory for contractors to have an all risk policy?

Why is the contractor all risk policy important?

What does a cross liability mean in a contractor's all risk policy?

What is covered in the contractor's all risk policy?

In which risks does the contractor's all risk policy not apply?

Is theft covered under the contractor’s all risk policy?

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This is an article by YouStory written by Palak Agarwal and published on October, 2022

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