Contractors All Risk Insurance

What is contractors’ all risk insurance?

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.

While standard policies from an insurance company only cover ‘named perils’ – i.e. the specific situations outlined in the contract – all risk construction insurance is more flexible. The ‘all risk’ part means that every legal liability is covered unless otherwise specified (almost the opposite of ‘named perils’ insurance). In addition to structural warranties and professional indemnity insurance, we provide this type of CAR insurance at Architects Certificate.

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:

• Contract works
• Public liability
• Employers’ liability
• Own plant or hired-in plant
• Privately owned tools or effects

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:

• Protection against personal injury: If a subcontractor claims for an injury sustained during a project, the insurance will help to cover the costs, including legal fees and medical bills.
• Property damage: If the property is damaged because of an incident during construction, the all risk insurance will cover the costs of bringing the property back to a usable standard.
• Claims after completed projects: If a subcontractor or third party claims for damages caused during a project once it’s completed, the all risk insurance will help cover the professional fees incurred for incidents while the policy was active.
• Loss or damage of equipment and materials: If any equipment or machinery is lost or stolen from the site during the construction project, your all risk policy will help provide funds to replace the equipment so the project can continue.
• Protection against negligence: If a claim is made against you or a contractor for injury or damages due to negligence then you can make a claim to cover any costs.

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:

• Professional indemnity – protects against mistakes and negligence in advice, design, or physical works.
• D&O – protects directors and officers against criminal, civil, or regulatory proceedings against managerial decisions and actions.
• Defective workmanship – a structural warranty protects yourself and the property owner or buyer against poor workmanship.
• Wear and tear – cosmetic damage or failure of equipment should be covered by the manufacturer’s warranty.
• Consequential losses – insurers will not cover any financial losses from taking too long to complete the project or carrying out redesigns.
• International projects – the policy should specify which countries it applies in, but it will not automatically cover working overseas.

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?

Yes, it can. 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:

• Value of contract works
• Project type and location
• Level of security
• Contract length
• Annual or project-specific insurance

Please give ABC+ Warranty a call on 0161 928 8804, email info@architectscertificate.co.uk, or send a message via our online contact form to discuss your requirements for contractors’ all risk coverage and obtain a no-obligation quote.