If you’re a construction contractor, you’re all too familiar with the inherent dangers of the work you do. That danger can translate into massive losses in the form of claims from your clients (or other affected third parties) for property damage and other compensation claims.
However, it’s difficult to protect against every eventuality on a construction site—there are so many things that can go wrong.
As a result, insurers offer contractors’ all-risks insurance (CAR) to avoid going you through the excruciating process of analyzing every risk individually. In this article, we’ll give you an overview of CAR cover (not to be confused with car insurance, which insurers actually call Motor Insurance!) and how it plays into your position as a contractor.
Understanding Contractors’ All-Risks Insurance
All-risks insurance policies are a non-standard type of insurance product designed especially for contractors. They provide coverage for property damage claims and third-party (injury and damage) claims.
These two types of claims are the most common claims associated with construction projects, and consequently the main sources of damage payouts for contractors.
Unlike some other kinds of insurance, CAR insurance policies are usually jointly requested by employers and contractors. Other parties, such as organisations financing the construction, also have the option of being named on the policy. Alternatives to CAR cover can be setting up funded escrow accounts jointly controlled by the lawyers to all of the parties.
Since several parties are involved in most construction projects, and since they may all stand to suffer losses in case of a claim, they all retain the right to file a claim against the insurer. CAR insurance is meant to protect everyone associated with the construction project, not just contractors.
CAR cover may even be extended to protect the interests of suppliers and manufacturers tied to a project. Even business losses as a result of a delay in opening a property can be included in the CAR policy, at an additional premium cost, of course.
What Does Contractors’ All-Risks Insurance Cover?
Since the parties protected by the coverage are so diverse, all-risks insurance cover may include a broad range of claims. Flood, fire, and weather damage to the construction site are some of the most common types of claims covered.
If there are any unforeseen events that result in work on the construction falling behind or needing to be redone, CAR policies may encompass that as well. Damage to the surrounding area and loss of business claims by adjacent businesses can also be a part of the extensions of CAR coverage.
As the name implies, all-risks insurance can be as broad-reaching as necessary to ensure that virtually all risks associated with a construction project are adequately covered.
What Doesn’t It Cover?
As broad as it is, CAR insurance can’t cover absolutely every event. In general, things that are typically covered by other types of insurance, such as employee liability insurance, aren’t a part of CAR policies.
Any losses as a result of design flaws in the construction or poor planning are also typically not included in CAR policies.
CAR Cover – Frequently Asked Questions
Q: If I own a building that’s already insured, do I need to take out separate CAR insurance for renovations and upgrades?
A: Typically, standard Property insurance policies don’t cover claims resulting from construction. That includes refurbishing, rebuilding, and upgrading your property. You’ll need a separate, non-standard CAR policy to be protected from those losses.
Q: Will CAR insurance cover general liabilities, such as employee injuries?
A: No. The purpose of a CAR policy is (in theory) to cover liabilities that aren’t explicitly covered by your standard contractor’s insurance. Think of it as an added form of coverage to the insurance you already should have as a contractor.
Q: Does CAR insurance extend past the end date of the project?
A: In most cases, CAR policies have a specific term, and usually, end upon the completion of a project, when the owner of the building assumes occupancy, or when the property is sold.
Q: How do insurers determine the risk involved in a CAR policy, ie the premium I will be charged?
A: Like all insurance policies, CAR insurance involves complex actuarial modelling to place you into a category of risk. To reach an accurate estimation, the insurer’s actuaries and underwriters will consider the scope of the project, the exact terms of the policy, and the location of the work. Policies are typically rated by Turnover, including machinery costs (Plant – either Owned or Hired-In). Typical high-risk factors include working at height, working with heat and working on groundworks/foundations.
CAR Policies—Completing the Insurance Needs of Contractors
A contractors’ all-risk policy is exactly what it sounds like—it mitigates all the risk that isn’t covered through other more standard policies. Depending on the project, the risks can be diverse and far-reaching, and a good CAR policy will attempt to cover any claims that would be catastrophic to the parties involved.
More so than some other types of insurance policies, CAR insurance policies require careful consideration of the potential risks and liabilities involved, to meet the needs of the various project stakeholders. Otherwise, they could lead to significant additional expenses that might jeopardize a project.
Working with InsuranceInspect Services, you can ensure you’re getting the coverage you need, not the coverage insurers want to sell you. We’ll help you reduce your insurance premiums Substantially, Safely, and Strategically.