What Is Contractors All Risks Insurance?
Contractors all risks (CAR) insurance is a specialist policy that covers physical loss of or damage to construction works during the course of a building project. It protects the contract works — including materials, plant, and temporary works — against a wide range of perils, from fire and storm to theft, vandalism, and accidental damage.
CAR insurance is project-specific, meaning it is taken out for the duration of a particular construction project rather than on an annual basis (though annual policies are available for contractors who undertake multiple projects). The policy typically runs from the commencement of works until practical completion, and may include a maintenance period.
Who Needs CAR Insurance?
CAR insurance is relevant to anyone involved in construction, renovation, or building works:
- Main contractors and building firms
- Subcontractors working on construction projects
- Property developers undertaking new builds or renovations
- Homeowners commissioning major building works
- Housing associations and local authorities commissioning construction
- Commercial property owners undertaking refurbishment projects
The question of who arranges the insurance depends on the contract. Under most standard construction contracts (such as JCT), the responsibility for arranging CAR insurance is specified in the contract conditions.
What Does It Cover?
A CAR policy typically covers:
- The permanent works — the building or structure being constructed
- Temporary works — scaffolding, formwork, and temporary structures
- Materials and goods — on site, in transit, or in storage
- Constructional plant and equipment (optional)
- Professional fees for redesign and specification following damage
- Debris removal and site clearance costs
- Local authority fees and compliance costs
Cover is provided on an "all risks" basis, meaning it covers all causes of physical loss or damage unless specifically excluded. Common exclusions include wear and tear, gradual deterioration, defective design or materials (though the resulting damage may be covered), and losses arising from war or nuclear risks.
JCT Contracts and Insurance
The Joint Contracts Tribunal (JCT) suite of contracts is the most widely used set of standard construction contracts in the UK. JCT contracts contain specific insurance provisions that set out who must insure the works and what cover is required.
Under the JCT Standard Building Contract (SBC), there are three insurance options:
- Option A (Insurance Option A) — the contractor insures new buildings in joint names
- Option B (Insurance Option B) — the employer insures new buildings in joint names
- Option C (Insurance Option C) — the employer insures existing structures plus the works (for renovation projects)
The choice of insurance option is specified in the contract particulars and should be agreed before the contract is signed. The party responsible for arranging insurance must ensure the policy meets the requirements set out in the contract, including the sum insured, the perils covered, and the joint names requirement.
CAR Insurance vs Public Liability
CAR insurance and public liability insurance are complementary but cover different things:
CAR insurance covers physical damage to the construction works themselves — the building, materials, and temporary works. It is a property damage policy that protects the financial investment in the project.
Public liability insurance covers your legal liability for injury to third parties or damage to their property arising from your work. For example, if a scaffold collapses and damages a neighbouring property, public liability responds to the third-party claim.
Cover for Existing Structures
When construction works are carried out on or adjacent to existing buildings, there is a risk that the existing structure could be damaged during the works. This is particularly relevant for renovation, refurbishment, and extension projects.
Under JCT Option C, the employer is required to insure the existing structure against loss or damage caused by the specified perils. This cover is in addition to the CAR insurance on the new works and is essential for protecting the employer's existing property investment. If you employ staff on site, you will also need employers' liability cover.
For non-JCT contracts, the responsibility for insuring existing structures should be clearly set out in the contract. If it is not addressed, there is a risk that neither party has adequate cover, leaving a potentially significant gap.
Choosing the Right Policy
- Ensure the sum insured covers the full contract value, including materials, labour, and professional fees
- Check that the policy period covers the full construction period plus any maintenance period
- Verify that the policy meets the requirements of your construction contract (JCT or otherwise)
- Consider whether you need cover for existing structures
- Check the excess levels — they can be significant on CAR policies
- Ensure the policy is in joint names if required by the contract
- Consider whether you need annual cover if you undertake multiple projects
Next Steps
Construction projects involve significant financial investment and a wide range of physical risks. CAR insurance provides essential protection for that investment, ensuring that damage to the works does not result in a financial loss for the project stakeholders.
Focus Insurance Services can help contractors, developers, and property owners arrange appropriate CAR insurance for their construction projects. Contact our team for a no-obligation discussion about your project insurance requirements.
Important Disclaimer
This article is for general information only and does not constitute insurance advice. The specific terms, conditions, and exclusions of any policy will vary. Always read your policy documentation carefully and speak to a qualified broker for advice tailored to your circumstances.
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