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Contractors All Risk Insurance: Protecting the Building Works and Meeting Contractual Requirements
- JCT 2024 & NEC4 Alignment
- Joint Names Protection Available
- DE5 Design Exclusion Available
Protecting the Building Works from Groundbreak to Handover
Construction projects in 2026 demand robust insurance protection. Developers, main contractors, and principal contractors need cover that not only protects the physical works, but also aligns with contract conditions, lender expectations, project stakeholders, and the growing regulatory pressures shaping the built environment.
Contractors All Risk (CAR) insurance is a comprehensive policy covering loss or damage to works under construction, and can also include cover for materials, tools, machinery, temporary structures, and equipment at the construction site.
Design Defects
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Access to wider design defect wordings, including DE5 and LEG 3 protection, can be critical on high risk and technically complex projects. Where a design defect is discovered, broader wordings can help preserve cover for resultant damage rather than leaving contractors exposed to a narrow exclusion.
Joint Names Policies
Construction contracts often require more than one party to be protected under the same policy. We help structure joint names arrangements for employers, contractors, and sub-contractors where required, helping reduce subrogation issues and avoid internal disputes after a loss.
JCT 2024 & NEC4 Alignment
We can help arrange Contractors All Risk policies designed to align with common insurance structures under JCT 2024 and NEC4 contracts, including responsibilities for new builds, extensions, and renovation works. Our aim is to provide comfort to employers, contractors, and funders the insurance programme reflects the contract requirements.
MMC & Modular Cover
Construction contracts often require more than one party to be protected under the same policy. We help structure joint names arrangements for employers, contractors, and sub-contractors where required, helping reduce subrogation issues and avoid internal disputes after a loss.
CAR Guidance & Support
“At Indemnity, Contractors All Risk Insurance is designed to support project certainty from the start through to practical completion and handover. Whether you are delivering a new build, refurbishment, fit-out, or infrastructure project, we help arrange Contractors All Risk cover that reflects how construction risk is actually allocated under today’s contracts and site conditions.”
What does ‘All Risks’ mean?
In insurance, “all risks” does not mean absolutely everything is covered. It usually means the policy covers accidental loss or damage unless the cause is specifically excluded in the wording. So instead of listing named perils like fire, flood, or theft, an “all risks” policy starts from a wider position of covering physical loss or damage, subject to the exclusions, conditions, limits, and endorsements in the policy.
Insurable Interest
Building projects will typically involve large sums of money and it's important that if an accident occurs - for example a fire destroys the timber frame, who is responsible and how will reinstatement of the works be funded? It's common for the employer, main contractor, and financier to have an insurable interest in the project build which needs financial protection. Contractors all risk policies can be extended to cover the interests of subcontractors, manufacturers, and even product suppliers.
Emerging Construction Risks
Escape of Water (EoW)
In 2026, water damage has become the leading cause of claims made under CAR policies. Projects with complex internal plumbing or high-rise buildings are particularly prone, with costs increasing from complex electrical systems.
Building Safety Act Compliance
The Building Safety Act has changed how projects are planned, reviewed, and delivered. Delays, regulatory hold points, inspections, and compliance scrutiny can all affect programme certainty. We help clients consider how Contractors All Risk cover interacts with these realities, including whether the project structure, period of insurance, stakeholder interests, and associated covers remain fit for purpose during regulatory pauses or project changes.
Non-Negligent Liability (6.5.1)
JCT 6.5.1 insurance can be provided as an add-on and protect against claims should there be damage to a neighbouring property and there hasn't been negligence. For example, collapse, subsidence, heave, vibration, weakening or removal of support, or lowering of groundwater, can all result from building works which are not the result of negligence on behalf of the contractor.
JCT 6.5.1 cover can be arranged under Contractors All Risks Insurance or on a stand-alone basis. Typically provided on a joint names basis to ensure protection for both the employer and main contractor.
Timber Framed Buildings
In 2026, the insurance market’s stance on timber frame buildings has evolved from avoidance to measured engagement. However, insurers still hold significant technical and financial concerns that dictate premiums and the availability of cover.
Storms and flooding are well-known risks for any property, especially when it may be structurally vulnerable or exposed to the elements for long periods. Underwriters also worry about "voids" in traditional timber frames. If fire enters the cavity between the frame and the cladding, it can spread undetected throughout the building.
Inflationary Pressures
The soft market has previously provided reductions in premiums as a result of over capacity in the market. However, inflationary pressures within the supply chain are starting to feed through to underwriters pricing models because of the increasing lag time between the policy starting and the potential claim materialising.
It is also recommended to regularly review your sums insured to avoid any potential underinsurance.
Specialist Construction Insurance
What is Covered?
Permanent Works
This is the core cover: the buildings, structural elements, and materials forming part of the contract works. In simple terms, it provides protection for accidental loss, damage, or destruction to the work in progress on a building site.
Temporary Works
Temporary structures and support systems can be just as critical as the permanent build. This may include scaffolding, hoardings, formwork, falsework, shoring, propping, and other temporary site elements needed during the construction phase.
Owned & Hired-in Plant
Construction projects depend on plant and equipment, whether owned or hired in. Cover can extend from smaller items through to excavators, dumpers, telehandlers, and cranes, with additional consideration for continuation of hire charges where hired plant cannot be returned following damage.
Breach of Privacy
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Materials in Transit
Materials and components are often exposed to loss or damage before they even arrive on site. Transit cover helps protect project materials while in movement from supplier, warehouse, fabrication site, or distribution point to the contract location.
Additional Benefits
- Debris removal - insurers will pay for the cost of removing debris from the site after a loss, along with any necessary demolition.
- Professional fees - If a building is significantly damaged, work has to be done by professionals such as architects, surveyors and engineers.
- Plans - this covers the loss of, or damage to plans and the cost of recreating the documents.
- Expediting expenses - provides cover against additional costs necessarily incurred for overtime, nightwork, express freight and the like.
- Free-issue materials - these are goods (not plant) that have been supplied by the employer without charge, but for which the contractor is legally liable.
- Automatic reinstatement - most policies automatically reinstate the sum insured after the loss but reserving the right to charge an additional premium.
- Maintenance periods - cover is only available for a maintenance or defects correction period if this is stipulated in the contract. The key point to remember is that cover relates to: 1) Damage to the contract works caused by an insured peril prior to the commencement of the maintenance period which comes to light during the maintenance period. 2) Damage to the contract works caused by the contractor in the course of any work carried out during the maintenance period in compliance with their obligations under the contract.
Policy Exclusions
Defects
The degree of cover that insurers will give for the cost of rectifying damage caused by defective design, materials or workmanship which come to light either during construction or after handover in the maintenance period differs significantly between insurers.
Standard policies will typically exclude the cost of replacing or repairing the defective part of the building. However, you can "write back" this cover using DE (Defect Exclusion) or LEG (London Engineering Group) clauses.
Whichever defects clause is used, it is important to appreciate that the mere fact that something is defective does not mean it is damaged. If a floor is cracked and uneven as a result of defective materials, design or workmanship, it is as a matter of law a defective floor - not a damaged floor.
Wear and Tear
This is not an 'actual event' of damage, more a gradually operating cause. It excludes from the insurance damage caused by deterioration due to atmospheric conditions, rust, corrosion or oxidisation.
Outside territorial or jurisdictional limits
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Inventory Shortages
Losses discovered only when a stock-take is carried out. Insurers are covering the results of specific loss or damage events. If the loss cannot be attributed to a specific event, insurers would not accept that the cause of loss was theft.
Loss of or Damage to Motor Vehicles
This exclusion applies to vehicles requiring insurance under the Road Traffic Act. It should not apply to vehicles primarily intended for use on contract sites.
Terrorism
Insurers exclude damage caused by acts of terrorism entirely but quote separately for it as a 'buy-back' on request. Terrorism is not an exclusion that is permitted under the standard JCT contract forms and cover should therefore be purchased unless the contract conditions are amended.
Defective Design, Materials or Workmanship
One of the most important areas of Contractors All Risk Insurance is the treatment of design defects. This is where the difference between policies can become commercially significant.
DE3 vs DE5
DE3 (the limited defective condition) clause - excludes property which is defective but covers other insured property which is free of defect and is damaged by the defective property. This is the most common level of cover provided in UK contract works policies.
DE5 (the design improvement) clause - provides full cover to both defective and non-defective property, but damage must occur. The existence of defects alone is not insured. The costs incurred in improving the design, materials and workmanship are excluded.
The higher the DE number, the wider the cover. DE3 and DE4 are the most common clauses in use. For high risk projects, DE5 can be the difference between a manageable loss and a major uninsured exposure, but insurers will charge a higher premium for the broader scope of cover.
How Much Does
CAR Insurance Cost?
Factors that influence your premium
- Contract Value & Duration - How much and for how long you will require cover will be a significant price determining factor. If a fire were to destroy the build, the size of the maximum possible loss and period of time to rebuild will impact your premium calculation.
- Project Type - A new-build housing estate has a significantly lower risk profile than a high-tech data center. High-rise projects now carry a premium "loading" due to the complexity of fire and water management at height.
- Project Work - 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 considered higher risk.
- Contractor’s Experience - Insurers like to see claim experiences. However, if the company has been created specifically for the project (i.e. SPV), we’ll need to submit details of your prior experience at different companies.
- Construction Methodology - Traditional brick and block remains the "gold standard" for low premiums. Modern Methods of Construction (MMC), such as modular units or Cross-Laminated Timber, attract higher rates due to concerns over repairability.
- Location Risks - Does the site have any specific challenges, for example higher incidence of flooding or theft 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.
Expert Advice: Why do you need a Specialist Construction Broker?
We can access A-rated insurance capacity, make sure the policy is suitable for your requirements, and provide advocacy when you need to make a claim in the future. We can challenge the insurer’s loss adjusters, interpret the fine print in your favor, and manage the friction so you can focus on your business.
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Fair Value Statement
Our CAR proposition is designed to provide fair value to contractors, developers, and construction firms that require protection for contract works, temporary works, site materials, plant, and associated project risks during the construction period.
The products are intended for businesses involved in building, refurbishment, fit-out, civil engineering, and related contracting activities that need insurance aligned with the nature, scale, and contractual structure of their projects.
We assess fair value by considering the relationship between price, cover, insurer capability, claims support, and the specific requirements of the construction project.
CAR Claims Paid
Factors that influence your claims
- Policy wording - Not all CAR policies are equal. Cover depends on definitions, exclusions, endorsements, and extensions. Design defect clauses, theft conditions, flood exclusions, and plant wording can all change the outcome of a claim.
- Policy Conditions - Insurers often apply conditions for hot works, site security, unattended plant, waste removal, water management, alarms, and inspections. If these are not followed, the claim can be challenged.
- Site Security - Claims for theft, malicious damage, or stolen plant may depend on fencing, locks, immobilisers, CCTV, security guards, or storage requirements being in place.
- Sums Insured - If the contract works, plant, or materials are underinsured, the claim payment may be reduced. Accurate sums insured are important from the outset.
Access to A-Rated UK & Lloyd’s of London Insurers
Testimonials
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Frequently Asked
Questions
Who needs Contractors All Risk Insurance?
Every building project should arrange cover to protect against the cost to reinstate or repair the works in progress resulting from loss or property damage during the course of the construction project. The main contractor's contract with the client will typically set out the responsibilities of each party, including who is contractually obliged to insure the various elements of the build.
Contractors All Risk Insurance may be suitable for:
- Main contractors
- Subcontractors
- Developers
- Housebuilders
- Civil engineering contractors
- Groundworks firms
- Refurbishment and fit-out contractors
- Design and build contractors
- Firms working on JCT, NEC, or bespoke construction contracts
What CAR policy should we purchase?
The right Contractors All Risk policy should reflect the value of the works, the project duration, design exposure, contract structure, plant usage, site conditions, and surrounding property risks. At Indemnity, we work with insurers that understand construction risk and have an appetite for high-value and complex development projects.
Do we need an “annual” or “project specific” CAR policy?
Cover will typically be purchased on an annual basis by the respective parties, for their own needs. An annual Contract Works policy can cover all works 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.
However, if cover is required on a joint names basis, over will need to be provided on a project specific basis for the duration of the contract. The sum insured is effectively ring fenced for that specific project, which provides comfort that sufficient cover will be made available. When arranging a project specific policy, it is recommended you include sufficient time for delays, as extending the policy is typically more costly.