What is Construction All Risk Insurance Policy?

By Okbima 16 Jan 2023
What is Construction All Risk Insurance Policy?

Construction All Risk Insurance Policy

Certain unforeseen accidents could occur during the execution of a project involving the construction of a building or civil engineering works, resulting in significant financial loss to the contract works, construction / or the principals arising from damage to the contract works, construction of plant and machinery, as well as Third Party Claims. The Construction All Risks (CAR) Insurance was created to protect the Contractors/interests Principal’s against such losses.

Do you require Construction All Risk Insurance Policy?


Although the Principal or the Contractor may purchase a Construction All Risk(CAR) policy, it is normally required of the contractor to obtain a CAR insurance in their joint names prior to the start of the project under the terms of the agreement between the contractor and the principal.

Why do you require Construction All Risk Insurance Policy?

Construction All Risk insurance covers the customer for any contingency beginning with the unloading of materials at the project site and continuing through storage, physical construction/erection, and test runs, as well as maintenance, if covered.

What all are included in Construction All Risk Insurance Policy?

Location Risks: Fire, lighting, theft, burglary, and housebreaking 

Testing and commissioning Risks: Failure of safety devices, electricity leakage, insulation failure, short circuit, and explosion.

Natural disasters: Storm, Tempest, Hurricane, Flood, Inundation, Subsidence, Landslide, Rockslide, and Earthquake.

Falling Object Impact: Collision, Crane or Tackle Failure, and Other Handling Risks

Human Element Risks: Negligence, Carelessness, Erection/Construction Errors, Strikes & Riots, Malicious Damage, Terrorism

What all are excluded in Construction All Risk Insurance Policy?

Perils of War and Allies

Insured/his representatives’ deliberate act or wilful carelessness.

Excess for each claim as specified in the policy.

Normal wear and tear, degradation over time, lack of usage, obsolescence, rust, and so on

Any damages or penalties incurred as a result of the Insured’s failure to meet the terms of delivery/completion under his building contract.

Nuclear and Allied Threats

Work has come to an end.

Only while taking an inventory are losses discovered.

Other than erection errors, loss/damage due to bad design, defective material, or casting.

Any type of consequential loss or liability.

Are there any added benefit?

Yes, there are some added benefits which can be availed by paying some nominal charges which provides protection against the following: –




Maintenance coverage is limited.

Coverage for extended maintenance

Debris removal and clearing

Damage to the adjacent property of the owner

Liability to a third party


Losses in a row

Support vibration, removal, or weakening

Loss or destruction as a result of a strike, riot, or civil unrest 

Drilling for water wells

Tests that have been Suspended

Fire Fighting

Automatic increase of Clause

Test Run for a Gas Turbine 

Test Run for a Steam Turbine

Declaration Clause 

Marine Offshore Works 

Coffer Dams

Inland Transit

Non-Disclosure/Breach of Policy Conditions

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