Contractors all risk insurance
Understand contractors all risk (CAR) insurance and secure contract works cover
What is contractors all risk insurance?
Contractors all risk (CAR) is a package policy designed to cover the risks associated with construction projects. The main cover under a CAR policy is contract works insurance that protects you against accidental loss, damage, or destruction to the work in progress on a building site. The cover is called 'all risks' because it will cover any perils without them being defined (i.e. fire, flood, storm, theft, vandalism, and explosion)
Additionally, contractors all risk insurance can can include public liability, product liability, and employers' liability. Plus the property covers can extend to plant, equipment and machinery on the construction site, whether owned or hired-in from a third-party. CAR plays an important role in providing protection to the building works whilst they are in progress and is commonly requested under construction contracts such as JCT.
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What building projects need CAR?
Every building project should arrange contractors all risk insurance to protect against the cost to reinstate or repair the works in progress resulting from loss or property damage during the course of the project. If a storm or fire destorys half the project and you are not insured, who is going to financially suffer? Typically, both the employer or principal and contractor will have an insurable interest in the project build.
Multiple insured parties
It is common for multiple parties to be named as insured parties on a contractor all risk insurance policy, given they have a financial interest in the construction project. Main contractors, principals, financers, are commonly included, but sub-contractors and suppliers can also be included.
Annual or project specific contract works
Contract works insurance can be arranged on either an annual or project specific basis. The need to arrange a project specific policy will typically be determined by the size of the project and whether a principal or financier wants to be named on a contractor all risk insurance policy.
Managing construction liability and project risks
It’s important to work with a specialist construction insurance broker when reviewing your needs. At Get Indemnity™ our contractors all risk insurance team can offer competitive quotes to contractors with a turnover up to £100 million. We maintain the expertise ensure our clients are fully protected on the projects they undertake.
We work with a wide range of insurers to find cost-effective CAR solutions for our clients
CAR insurance quotes start from £468 annually or £39 monthly for small building projectsWhat does a CAR policy cover?
Contract works
Contract works insurance will help protect the work in progress on a construction site in the event of damage before responsibility has been handed to the principal. Note if you are working on an existing structure, the existing structure will not be covered and should be insured by the property owner. Contract works insurance will cover any loss or damage to the property and materials.
Public & product liability
Public liability insurance and product liability insurance helps protect against claims arising from injury or property damage of persons other than your employees (i.e., customers, suppliers, contractors or third persons) in the course of your construction activities.
Employers' liability
Employers' liability insurance helps protect against claims arising from injury or illness of your employees. Note all companies under UK law have a legal duty to protect the safety of their employees at work. It is one of the few types of insurance compulsory in the United Kingdom.
Own plant & equipment
Own plant and equipment insurance helps protects against damage to own plant and equipment whilst in your custody or control or hired out under a defined agreement. For example: scaffolding, temporary buildings, site office contents and site welfare facilities.
Hired-in plant
Hired-in plant and equipment insurance will help protect your legal liability under the terms of your hiring agreement to pay compensation for damage to hired-in plant, whilst in your custody or control.
Employee tools
Employee tools insurance will help protect against damage to personal tools and effects belonging to an employee, or principle. Cover can vary from policy to policy, so consider whether you have the protection you need.
Contractors all risk insurance explained
Contract works vs contractors all risks insurance
The terms can be interchangeable within the building trade and arranging the cover can be the responsibility of either the employer or the main contractor. Contract works insurance will reinstate or repair the building works resulting from any damage or destruction. It’s important to note both contract works and liability covers will need to be arranged to provide for contractors all risk.
Does public liability insurance cover contractors?
Public liability insurance will cover claims arising from injury or property damage of persons other than your employees or labour only subcontractors. It will be the responsibility of each contractor to purchase their own public liability. The cover can be arranged separately with employers liability insurance, or under a contractor all risk insurance policy.
Do you need additional JCT 6.5.1 insurance?
Otherwise known as non-negligence insurance, will protect against claims should there be damage to a neighbouring property. Collapse, subsidence, heave, vibration, weakening or removal of support, or lowering of groundwater, can all result from building works which is not which is not the result of negligence on behalf of the contractor. The cover can be arranged under a contractors all risks policy or on a stand-alone basis and will protect the employer.
Calculating your premium
Insurers will calculate your CAR premium depending upon a number of factors because each provider will have their own method of assessing your risk of claim. However, there are common considerations that underwriters will focus on:
Contract value
How much contract works insurance you will require will be a significant price determining factor. If a fire were to destroy the build you were responsible, the size of the maximum possible loss will impact your premium calculation.
Type of project
Basement works, timber construction, demolition works, quarrying, tunnelling, flood exposed areas, road construction, bridgework, external work on high-rise buildings, piling, ground stabilisation, underpinning, are all considered high risk.
Site security
Additional security features that will improve your risk profile and reduce your premium cost. These can include cameras, alarms, boundary fence, and 24 hour security.
What contractors all risk insurance excludes?
Whilst a CAR 'all risk' policy can provide for a number of covers designed specifically for the construction industry, this does not mean your business shouldn't consider other insurance policies.
Looking for contact works or contractors all risk? We can separate or combine your builder's liability and property cover
Quotes for CAR insurance from the wholesale market start at £468 annually or £39 a monthContract works insurance explained
It’s important to understand who has an insurable interest in the building works being developed. It’s common practice to have the contractor and employer take out the contractor all risk insurance policy on a joint names basis. Then at the request of the project financier, they may require you to name them as an additional insured or as a first loss payee. It’s worth noting that CAR insurance policies can be extended to cover the interest of subcontractors, contractors, manufacturers, or even suppliers.
Employer / Principal - As the client of the project you have a vested interest should the works be damaged or destroyed before practical completion.
Builder / Contractor - As the person responsible for undertaking the works, the main contractor will typically organise the cover on behalf of the employer.
Financer / Lender - As the person which has financed the development, you may require assurances that you are named party on the CAR insurance policy.
Do we need a first loss payee endorsement?
The policies can be endorsed to ensure all parties are covered on a project, regardless of who is at fault. This can include an ‘additional insured’ or 'first loss payee' endorsements for financiers of the project. To make the request to include a financier, please identify how they want to be named on the policy, confirmation of the legal entity and their registered address.
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Frequently asked questions
Do you need an annual contractors all risk insurance policy or project specific?
Contract works under a CAR insurance policy will typically be purchased on an annual basis by the respective parties, for their own needs. An annual contract works policy will cover all work undertaken in that year, up to a maximum contract value per project. This is usually the most cost-effective solution for contractors who typically undertake multiple projects each year. Larger building projects may prefer to arrange their CAR insurance for all parties on a project specific basis. However, issues can arise if there are delays in construction and this extends past the agreed policy period.
Who should purchase the project's contract works cover?
Your contract with the employer will typically set out the responsibilities of each party, including who is contractually obliged to insure the various elements of the build under a contractor’s all risk insurance policy. JCT contracts are the mostly commonly used in the UK (75% of all construction projects) and will identify what insurance covers you are required to purchase and who's responsibility they are. It's worth considering that although it may be contractually the responsibility of the employer, the insurance is usually more accessible through the contractors insurance broker.
Does contractors all risk cover defective workmanship?
Most losses will arise from straight forward events such as a fire or water damage. However, in some circumstances there maybe contributary factors such as defects with design, planning, specification, materials, or workmanship. Some policies will maintain a total exclusion arising from defects, which can significantly limit the scope of cover. Whereas, the majority of insurers will exclude the contracts works which is in a defective condition, but will include cover for the parts of the contract works which is damaged because of the defect. The difference between the different types can have a significant impact on the amount paid out under a policy.
What is the maximum coverage limit for contractors all risk?
The maximum coverage limit will be the contract value of the project given the policy can only provide indemnification - which puts you back into the same financial position you were before the loss or damage occured.
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