Contractors' All Risk (CAR) Insurance

What is Contractors' All Risk (CAR) insurance?

Contractors' All Risk insurance is a project policy that covers civil construction works against accidental physical loss or damage during the construction period. It also covers the legal liability of the insured parties to third parties for bodily injury or property damage caused by the works.

It is called “all risk” because it covers any sudden and unforeseen damage unless the policy specifically excludes it. That is different from a named-perils policy, which only pays for the causes it lists. CAR is usually taken for buildings, roads, bridges, tunnels, dams, water and sewage works and similar civil projects. It sits within our wider range of construction insurance solutions.

What CAR insurance covers

A CAR policy normally has two sections.

Section I: Material damage

• The permanent and temporary contract works, including materials delivered to site and awaiting use.
• Damage from fire, lightning, explosion, flood, storm, earthquake, subsidence, landslide, theft, burglary and accidental damage by workers.
• Optional extensions for construction plant and equipment, site offices, existing surrounding property and removal of debris.

Section II: Third-party liability

• Accidental death or bodily injury to people who are not employees of the insured.
• Accidental damage to property belonging to third parties, such as adjoining buildings, roads or utility lines.

Several parties can be named as insured, typically the principal or developer, the main contractor and sub-contractors. This avoids disputes about whose policy should respond after a loss.

What is not covered

• Loss caused by faulty design, defective material or poor workmanship. The cost of correcting the defect itself is excluded, although resulting damage may be covered under certain extensions.
• Wear and tear, rust, gradual deterioration and normal settling.
• Mechanical or electrical breakdown of construction plant.
• Loss discovered only at the time of taking inventory, with no identifiable event.
• Penalties, liquidated damages and loss of contract.
• Wilful negligence, war, nuclear risks and cessation of work.
• Injury to the insured's own employees, which falls under an employees' compensation policy.

Who needs CAR insurance

Developers building residential towers, commercial offices, malls and hotels. Civil and EPC contractors working on infrastructure. Government and PSU contractors, where tenders commonly require an all-risk project policy. Anyone whose lender or contract requires the works to be insured. Most construction contracts specify who arranges the cover and the minimum sum insured, so the contract is the starting point for every placement.

How the sum insured and premium are decided

The sum insured for the works should be the full completed value of the contract, including materials and labour, plus any materials supplied by the principal. Under-insurance leads to a proportional reduction in claims. The premium depends on:

• The type of construction and the method used, such as deep excavation, basements or high-rise work.
• The location and its exposure to flood, earthquake and water table issues.
• The project duration, including any testing period.
• The deductibles chosen, which are usually higher for natural catastrophe losses.
• The contractor's experience and site safety record.

If the project runs longer than planned, the policy period must be extended before expiry. Letting it lapse is one of the most common and costly mistakes we see.

How MILES helps

MILES has insured 24 of 30 major project launches by leading Gurugram developers over a two-year period, covering residential, commercial and hospitality work. On each project we:

• Read the construction contract and lender clauses, then build the cover around those obligations.
• Compare terms, deductibles and extensions from several of the 16+ insurers we place business with.
• Check the sum insured against the project budget and escalation, so the policy keeps pace with the build.
• Track the policy period and arrange extensions before the construction schedule overruns it.
• Support the claim from site survey to settlement through our claims team.

For projects where a delay would hit revenue, we also look at Advance Loss of Profit cover alongside the CAR policy.

What we need for a quote

1. Project name, type, site address and a short description of the works.
2. Total contract value, broken down by civil works, finishes and principal-supplied materials if possible.
3. Start date, expected completion date and maintenance period.
4. Details of basements, excavation depth and nearby structures.
5. Names of the principal, main contractor and key sub-contractors to be insured.
6. The third-party liability limit required by the contract or lender.

Share these with us through our contact page and we will come back with a comparison of options.

Cover, exclusions and premiums depend on the insurer’s policy wording and underwriting. MILES Insurance Brokers Pvt. Ltd. is an IRDAI-licensed direct broker (Life & General, Reg. No. 954); the insurance is issued by the insurer. Insurance is the subject matter of solicitation.