Construction All-Risk (CAR) Insurance

Construction All-Risk (CAR) Insurance is the standard broad-coverage insurance policy for physical damage to civil engineering and building works during the construction phase, covering the permanent works, temporary works, contractor's plant and equipment, and on-site materials against loss or damage from any peril not specifically excluded.

What is Construction All-Risk (CAR) Insurance?

CAR insurance attaches when construction commences and typically runs to the date of practical completion or the end of the defects-liability-period, with some policies providing a maintenance period extension. The policy covers the contract works themselves: structures, foundations, mechanical and electrical installations, and materials awaiting incorporation. It also covers the contractor's plant and equipment on site, including excavators, cranes, and scaffolding, under a separate section of the policy.

The "all-risk" structure means any physical loss or damage is covered unless the policy specifically excludes it. Standard exclusions include design defects (for the defective element itself, though damage to the surrounding works caused by a defective component is typically covered), wilful misconduct, war, nuclear risk, and contractual penalties such as liquidated damages. Earthquake and flood may be excluded or sub-limited in high-hazard zones, requiring specialist extensions.

In development-bank-financed civil works contracts using FIDIC conditions, CAR insurance is a non-negotiable contractual requirement. The policy must name both the contractor and the employer as joint insured parties, preventing the employer from recovering damages from the contractor's insurer (and vice versa) for insured events, which is a deliberate design to avoid litigation between the two parties over insured losses.

Why CAR Insurance matters for bidders

CAR premiums are a real cost item in the bid price, often representing 0.2 to 0.8 percent of contract value depending on project complexity, location, and hazard profile. A bidder pricing a project in a flood-prone or seismically active region must check whether the standard CAR policy covers those perils or whether an endorsement is needed. Projects in certain jurisdictions may require the insurance to be placed with a locally licensed insurer, which limits choice and may affect premium. Confirming insurer availability and indicative premium before bid submission is standard practice for any significant civil works tender.

FAQ

Who takes out the CAR policy in a construction contract?

The contractor typically takes out the CAR policy and names the employer as an additional insured, though some contracts (particularly design-build concessions) require the employer to provide the policy, with costs included in the contract price.

Does CAR insurance cover third-party injuries on site?

CAR policies do not cover third-party bodily injury, which is the domain of third-party-liability-insurance. Most contractors hold both policies together, and some insurers offer combined CAR and third-party liability cover in a single contract works policy.

What happens to the CAR policy during the defects liability period?

CAR policies are usually extended to cover the maintenance or defects liability period, but typically on a narrower basis covering only damage caused by the contractor during remedial works, rather than the full all-risk coverage of the construction phase.