Contractor All Risk (CAR) Insurance

A Contractor All Risk Insurance Policy is an important insurance policy for the Civil Work Contractors/ Sub-contractors/ Owners/ Builders/ Engineering Companies involved in civil works. Any Civil work whether in the Commercial line or Residential line for example a Mall, Bridge, Offices, Flyover, Roads, Societies, School, Residential Building, etc. can be covered in Contractor All Risk Insurance Policy.

A Contractor All Risk Insurance Policy has mainly 2 coverages. One it covers the loss or damage to the Civil Work being carried out and the material or equipments used in its construction.

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Contractor All Risk insurance policy is most suitable for the Civil Contractors or Sub-contractors. Whereas the owners or promoters of a Commercial or Residential project can also buy this policy in order to avoid any liability falling on their heads due to an accident at the construction site. Sometimes even the project financiers take the policy to cover any loss arising from an accident.

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A Contractor All Risk insurance policy has 2 main sections.

  1. Physical loss or damage to the structure or material or equipments being used in construction by any risk which is not specifically excluded from the policy.
  2. Third party liability which may arise from the Death, Disability caused to a third party or any third party property being damaged due to accident.

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Insured can take following add-on covers by paying additional premium.

  1. Surrounding property
  2. Cross Liability – insured vs. insured
  3. Cost of removal of debris
  4. Express Freight – Air Freight, Overtime charges, etc.
  5. Additional Custom Duty
  6. Escalation Cost
  7. Earthquake
  8. Construction Plant and Machinery (CPM)
  9. Terrorism
  10. Extended Maintenance Cover
  11. Material storage risk at fabricator’s premises or workshop

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Sum Insured in Section 1 (loss or damage to civil work/ material/ equipments) – The Sum Insured in this section should reflect the exact cost of contract which must include the labour cost and the material cost. This should not cover the gross profit as that is not covered in the policy. Insured can also add Escalation cost up to 50% of the cost of contract if it expects the cost of project to rise significantly while the construction work is in progress.

Sum Insured in Section 2 (third party liability) – limit of liability under this section should be selected carefully keeping in mind the maximum number of accidents that may arise during the policy period and the quantum of liability that may fall on insured in those cases.

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The policy period in Contractor All Risk Insurance policy should be the contract period or the time when the project commences till its handover to the principal/ project owner.

Policy has a feature to extend the policy period in case the project isn’t completed in time or is delayed due to any reason upon paying additional premium for the extended period.

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A Contractor All Risk insurance policy has following exclusions.

  1. Faulty Design of structure
  2. Rectification of Aesthetic Defects
  3. Wear and tear of civil work
  4. Pecuniary liability arising out of delay in delivery of project or quality of project
  5. War and related perils
  6. Wilful act or wilful negligence of insured
  7. Cessation of work ordered by authorities
  8. Consequential Loss, etc.

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