What is contractors’ all risk insurance?
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Contractors’ all risk insurance (CAR) is a non-standard insurance policy that provides mass coverage for ongoing construction projects. It is especially useful for contractors, including builders, electricians, and plumbers. The primary types of risks are property damage or theft and third-party damage or injury claims.
For example, should you find yourself in the unfortunate situation of a half-completed property being destroyed by a fire or flood that neither you nor the customer was responsible for, you’ll need contractors’ all risk insurance to pay for repairs.
This way, you won’t be out of pocket for the cost of redoing the work, and your client won’t be unhappy about having to pay twice.
Who is contractors’ all risk insurance for?
This type of property insurance is usually taken out at the start of a construction project by both the employer and contractor. However, it’s used by anybody who is working on a construction site.
The policy covers both employer and contractor and includes any other parties or subcontractors involved in the construction project – including everyone from site manager to electricians and plumbers.
In the event of a claim, both employer and contractor must seek insurance from the policy to cover any costs.
What does contractors’ all risk insurance cover?
A contractor’s all risk policy should cover all of your equipment, materials, and employees on the building site for the duration of your project. Of course, this includes the structure itself, whichever stage of progress it may have reached, and any temporary buildings such as portable office units.
It’s possible to get separate policies to cover different areas, such as contract works insurance for the construction and tools then public liability insurance for third-party damages, but it’s far more cost-effective to roll these into one policy. As a comprehensive package, CAR insurance can cover:
You may also be able to extend this cover to include extras like legal expenses, non-negligence for damage to neighbouring properties, and more, including:
As a contractor or developer, if you expect to sell the property, then the buyer’s insurance provider will require you to have the appropriate insurance yourself.
What’s excluded from contractors’ all–risk insurance?
Being able to claim financial compensation for a variety of damages, losses, and injuries is extremely useful if something goes wrong. However, as with any policy, it can’t realistically cover every potential risk. This is why exclusions like these are specified in the contract:
The CAR policy should cover you against damages caused by external circumstances, such as theft, vandalism, fire, or third–party injuries, for the agreed-upon duration of the works. It usually won’t cover the above instances, or force majeure situations such as natural disasters or sudden wars.
Is contractors’ all risk insurance the same as professional indemnity insurance?
No – professional indemnity insurance covers yourself and your construction business from any number of claims, such as negligence, errors in the construction, and omissions made.
These claims typically come from your clients and third parties. Other things that are covered under professional indemnity insurance include defamation cases and intellectual property infringement, compensation for damages, and legal costs.
Is contractors’ all risk insurance the same as contract works insurance?
While they do sound similar, contractors’ all risk insurance and contract works insurance are slightly different.
Contract works insurance, for example, is obtained by property developers, builders, and other parties involved in the construction project. It’s designed to cover the cost of repairing a project that’s been damaged by events like floods, vandalism, theft, or fire.
The insurance can cover the cost of labour, tools, and materials, depending on the level of coverage.
Does contractors’ all risk insurance cover hired-in plants?
Hired-in plants include large equipment, heavy machinery, and tools, which are rented from a supplier.
The insurance protects against the risk of the equipment being damaged, stolen, or becoming unusable.
While contractors’ all risk insurance covers hired-in plant insurance, it can provide value for your business and save you time to ensure construction projects aren’t halted and stalled.
How much does contractors’ all risk insurance cost?
Since CAR insurance has a wider scope than other types of coverage, the premiums may be higher than you might expect. However, we’re happy to explain how your circumstances affect the cost of CAR insurance, including the scale, value, location, and duration of your building project.
Here are some common considerations that usually affect the cost of contractors’ all risk insurance:
FAQ
As explained above, there are generally several elements of construction work that this type of insurance covers. That said, these aren’t always included as standard, so you may have to request some amendments before you’re happy with the extent of your CAR policy.
If the contract you’re offered doesn’t include the following, and you believe you may need them, you might want to ask your insurer to add any of these things to your suggested cover:
Temporary buildings
Onsite storage
Engineer fees
Restoration of plans/drawings
Demolition/removal of debris
Overtime work/holidays
Surrounding property
Equipment during transit
Commercial legal expenses
These extras aren’t guaranteed, as it depends on your provider’s risk assessment, and usually means extending claim limits. Additional cover also means additional costs, resulting in higher premiums.
For any more help with contractors’ all risk insurance cover, don’t hesitate to contact us.
The payment terms for your contractors’ all risk insurance policy will depend on your contract. There are different types available according to the coverage you need, whether that’s an annual policy or a separate policy for a specific project.
You can purchase annual contractors’ all risk insurance every year to cover all work that you undertake during that year, with a maximum value per project. This is usually the easiest solution for contractors who work on multiple projects every year.
Alternatively, project-specific contractors’ all risk insurance might be the better option for a larger-scale venture, especially if it involves multiple parties on a joint policy. The only issue is that these tend to have a limited timeframe.
In some cases, it may be possible to extend your coverage if the project overruns past its original deadline. Whichever approach you take, you must always set up contractors’ all risk insurance before any work commences, to avoid issues with claims.
Other than employers’ liability insurance, it’s not legally mandatory to have contractors’ insurance. However, this doesn’t mean it’s not necessary to have some sort of comprehensive cover for your construction projects.
As you’re aware, the construction business possesses plenty of risks, and the last thing anyone wants is to foot the bill for costly repairs and replacements in the event of damage or theft.
Not only does having contractors’ all risk insurance protect you, but it’s also likely to get you more business. Clients may be unwilling to work with you if you don’t have the security of a CAR policy, even if it’s not a contractual obligation.
Many parties that you’ll be working with are likely to request proof of your insurance status before agreeing to a contract, so it’s best to be prepared for all eventualities. This level of professionalism can also help to boost your reputation as a reliable contractor.
How we calculate the cost of your contractors’ all risk insurance policy will depend on several factors. These include the scope, location, value and duration of your project. Here are some of the factors that will influence the cost of your policy:
Size of the project – This will indicate the level of risk that’s posed, as large-scale construction projects typically carry an increased amount of risk.
Turnover & wages distribution – The distribution of turnover and wages between various construction activities and the perceived risk that is attached to each of these can impact your insurance premium.
Working at height – More than 6 meters above floor level.
Other factors – Making excavations, working with heat and using industrial machinery.
Several claims – Making several large claims previously with a lack of remedial action can indicate that risks are not being properly managed and will inevitably affect your insurance cost significantly.
Yes, legal costs for liability claims made against your business are included as a standard option in our contractors’ all risk insurance cover.
In the event of a claim, your contractor’s all risk policy will offer you access to sound legal advice in a range of circumstances. You will be able to obtain expert legal guidance relating to your property, employment, any contract disputes, and a variety of other legal issues.
If you would like cover for any temporary site structures, such as huts or storage areas, you should inform us of this when you take out the insurance cover. The temporary site structures and their contents will be covered by your insurance policy, as long as you tell us about them when you purchase the cover.
If you’ve already taken out a contractors’ all risk insurance policy with us and you’ve decided that temporary site structures are needed after the event, just give us a call and we can update your policy.
To discuss exactly what would be covered with a contractors’ all risk insurance policy with a knowledgeable member of our team, give us a call on 0161 928 8804 or send us a message and we will get back to you shortly.
Whilst it covers you for damages caused by things that are out of your control, the main purpose of general liability insurance is to cover your business against claims made by members of the public. This could be a claim for injury, property damage or illness caused by your company’s work.
For example, if a member of the public were to be hit by rubble falling from your building site, general liability insurance would cover you against this.
And whilst your general liability insurance would cover damage to a hardwood floor that was caused by an employee dropping some equipment, your contractors’ all risk policy would cover damage to the floor caused by a trespasser.
In short, general liability insurance protects you only against claims made against your business. On the other hand, all risk cover protects you against claims made against your business, damage to the structure itself, and loss, theft or damage of your equipment and building materials.
