Contractors All Risk (CAR) Insurance: What Every EPC Contractor Should Know

If you execute civil works — buildings, roads, bridges, water pipelines — a Contractors All Risk (CAR) policy is usually a contractual requirement. But beyond satisfying the work order, CAR is the only cover that pays when the works themselves are damaged before handover.

What CAR actually covers

CAR is an 'all risk' policy, which means it covers any sudden, unforeseen physical damage to the contract works unless specifically excluded — fire, flood, storm, collapse, theft of materials, and damage during construction. Most policies also include a third-party liability section for injury or property damage caused to others by your site activity.

What it does not cover — by default

• Defective design, workmanship or materials (the resulting damage to other parts may be covered under DE/LEG clauses — ask for them)
• Wear and tear, gradual deterioration
• Losses discovered only during routine inventory
• Machinery breakdown of your own plant (that is a CPM policy)
• Penalties, liquidated damages and delay costs (these need ALOP/DSU)

Clauses that decide your claim

The difference between a paid claim and a disputed one is usually in the endorsements: the maintenance period cover, the 50:50 clause for pre-existing defects, escalation cover for long projects, and removal-of-debris limits. Getting these worded correctly at the start costs little; discovering them missing after a collapse costs everything.

Practical tips before you start a site

• Match the sum insured to the full contract value including materials supplied by the principal
• Declare the correct project period — extensions mid-claim are painful
• Check whether the principal, sub-contractors and lenders need to be named as co-insured
• Keep daily site records and photographs — they are your best evidence at claim time

A broker who reads your contract before placing the policy will catch mismatches between your contractual insurance obligations and the policy wording. That review is where most CAR disputes are prevented.