In the construction world, uncertainties are as real as concrete and steel. Whether you’re a contractor, builder, property developer, or even a project financier, there’s one protective shield you shouldn’t ignore — Contractors All Risk Insurance (CAR Insurance).
But what is this insurance all about? Why is it called “All Risk”? Does it truly cover everything? How does it differ from builder’s risk insurance or public liability policies?
This guide will clear up the confusion and walk you through everything you need to know about Contractors All Risk Insurance — from coverage details to claim processes, common exclusions, premium factors, and even expert tips to select the best policy.
What is Contractors All Risk Insurance?
Contractors All Risk Insurance, often abbreviated as CAR insurance, is a comprehensive insurance policy designed to cover the physical loss or damage to civil engineering projects under construction.
Unlike standard insurance that only covers specific events, CAR insurance provides all-risk coverage, meaning it covers any accidental damage or loss, unless specifically excluded in the policy.
Who is it for?
- Contractors
- Builders
- Sub-contractors
- Real estate developers
- Infrastructure firms
- Property owners during construction
- Financiers or lenders involved in the project
What Does CAR Insurance Cover?
CAR Insurance typically offers two major types of coverage:
Material Damage Cover
Fire, explosion, lightning
Storms, floods, earthquakes
Theft, vandalism
Collapse of the structure
Construction defects
Errors in design (optional in some policies)
Third-party machinery damage
Accidental damage during construction
Third-Party Liability Cover
Covers legal liability for:
Bodily injury or death to third parties (e.g., bystanders)
Property damage to adjacent structures
Legal expenses incurred during claim settlement
What is Not Covered? (Common Exclusions)
Every CAR insurance comes with exclusions. Some of the common exclusions include:
- Normal wear and tear
- Design flaws (unless specifically covered)
- Loss due to war, terrorism or nuclear risks
- Intentional damage
- Contractor’s professional negligence
- Losses after project completion (unless extended)
- Consequential losses (like loss of profit)
Pro Tip: Always read the policy wordings carefully to understand what is and isn’t covered. Customising coverage can help fill those gaps.
Types of Projects Covered Under CAR Insurance
CAR Insurance isn’t just for skyscrapers! It applies to a wide range of construction projects, such as:
- Residential & Commercial Buildings
- Roads & Highways
- Bridges & Flyovers
- Factories & Warehouses
- Metro, Railways & Tunnels
- Airports & Ports
- Pipelines & Water Projects
- IT Parks & Townships
How Are Premiums Calculated?
The insurance premium for the Contractors All Risk policy depends on various factors:
| Factor | Impact on Premium |
|---|---|
| Total project cost | Higher value = higher premium |
| Type of construction | Riskier projects cost more |
| Project duration | Longer duration = higher premium |
| Sum insured | Directly affects the premium |
| Location risk (flood/earthquake zones) | Higher premium in risky areas |
| Claim history of contractor | Clean history = lower premium |
| Cover extensions (like surrounding property) | Higher premiums in risky areas |
What Documents Are Required to Buy a CAR Policy?
Here’s a quick checklist of documents:
- Project details (type, location, value)
- Project schedule and duration
- Contractor & subcontractor details
- Construction method & materials used
- Previous insurance details (if any)
- Risk assessment report (in some cases)
- Financial proof (in case of large projects)
How to File a Claim Under Contractors All Risk Insurance?
Accidents happen. When they do, here’s how to ensure a smooth claim settlement:
Step-by-Step Claim Process
- Immediate Notification: Inform the insurer as soon as the damage or loss occurs.
- Incident Documentation: Take photos/videos, prepare a detailed incident report.
- Submit Claim Form: Provide relevant documents — invoices, work orders, and project blueprints if needed.
- Surveyor Appointment: The Insurer appoints a surveyor to assess the loss.
- Loss Estimation & Approval: Once verified, the insurer gives a go-ahead.
- Claim Settlement: The approved amount is disbursed.
Important Tip: Keep your site records organised. It saves time during audits or inspections.
How Long is the Policy Valid?
Typically, CAR insurance is valid from the start of construction until the project is completed, including the testing and commissioning phase. You can also opt for an extension known as Maintenance Cover, which protects against defects discovered after completion (commonly 3 to 12 months).
CAR Insurance vs Builder’s Risk Insurance vs Public Liability
| Feature | CAR Insurance | Builder’s Risk | Public Liability |
|---|---|---|---|
| Covers construction material loss | ✅ | ✅ | ❌ |
| Covers 3rd-party injury/property | ✅ | ❌ | ✅ |
| Suitable for contractors & owners | ✅ | ✅ | ✅ |
| Includes plant/machinery damage | ✅ | ❌ | ❌ |
| Customizable extensions | ✅ | Limited | Limited |
Optional Extensions (Add-Ons) You Should Consider
- Escalation Clause (to cover cost inflation)
- Surrounding Property Damage
- Cross Liability
- Contractor’s Plant & Machinery (CPM)
- Debris Removal Costs
- Employee Compensation Cover
- Terrorism Cover
- Erection All Risk (EAR) Insurance (for mechanical installations)
CAR Insurance in India
In India, CAR insurance is mandatory for most government and public infrastructure projects. Leading insurers like:
- New India Assurance
- ICICI Lombard
- HDFC Ergo
- Bajaj Allianz
- Tata AIG
… offer tailor-made CAR policies with add-ons, endorsements, and flexible coverage limits.
Why Should You Never Skip CAR Insurance?
- Construction sites are inherently risky.
- A single accident can lead to massive financial loss.
- Mandatory for large-scale projects in many regions.
- Boosts client and investor confidence.
- Often a contractual requirement from developers or lenders.
- Protects contractors from unexpected delays or lawsuits.
FAQs
What is the difference between CAR insurance and EAR insurance?
CAR (Contractors All Risk) is for civil projects like buildings and roads. EAR (Erection All Risk) is for mechanical installations like turbines, generators, etc.
Is CAR insurance mandatory for small contractors?
It’s not legally mandatory everywhere, but many developers or tender contracts require it even for smaller works.
Can I buy CAR insurance for renovation work?
Yes, as long as the renovation involves structural changes or high-value work, it can be covered under CAR policy.
What happens if a flood damages the site? Is it covered?
Yes, natural calamities like floods are covered unless they fall under a specific exclusion. Check your policy’s flood clause.
How long does it take to settle a claim?
If documentation is complete and no dispute arises, claims are usually settled within 30 to 60 days.