Contractors’ All Risk (CAR) Insurance is a crucial investment for any construction project in India. This specialised policy provides financial protection against unforeseen events that can disrupt project timelines and impact your bottom line.
With numerous insurance providers in the market, selecting the right CAR Insurance Policy can be challenging. If you are looking to purchase CAR Insurance for your business, this guide will take you through the process, explain the key steps and help you make an informed decision.
What is Contractors’ All Risk Insurance?
CAR Insurance is designed to cover specific risks associated with construction projects. It provides coverage for:
1️⃣ Material Damage Coverage
Protects against accidental physical loss or damage to the insured contract works due to covered perils such as fire, storms, floods and theft.
2️⃣ Third-Party Liability Coverage
Covers legal liability for accidental bodily injury or property damage to third parties during construction activities. However, it does not cover damage to property owned by or under the custody of the insured.
Note: Coverage for terrorism, off-site storage and debris removal is not automatically included and must be added separately.
Why Should You Consider CAR Insurance?
✔ Protection Against Major Risks: Covers specified perils like fire, explosions & implosions, riots, strikes & malicious damage, earthquakes and theft.
✔ Third-Party Liability Coverage: Protects against legal claims from third parties for accidental loss/damage caused by the construction activities of the insured.
✔ Financial Security: Helps mitigate financial losses due to covered incidents.
✔ Contractual Requirement: Often required by Government and private contracts.
✔ Enhances Credibility: Shows professionalism and commitment to risk management.
Steps to Buy Contractors’ All Risk Insurance
1️⃣ Assess Your Business Needs
Evaluate the specific requirements of your construction project, considering:
✔ Project Size & Scope: Large projects may need higher coverage limits.
✔ Location: Areas prone to earthquakes, floods or theft may require additional coverage.
✔ Type of Construction: Residential, commercial or industrial projects have different risk exposures.
✔ Equipment & Machinery: Determine if coverage for construction equipment (e.g., cranes, bulldozers) is needed.
2️⃣ Compare CAR Insurance Policies from Multiple Insurers
Since not all CAR Insurance policies offer the same coverage, comparing different options is essential. Look at:
✔ Coverage Limits: Ensure the sum insured matches the full project value.
✔ Exclusions: Read the policy carefully to understand what is NOT covered (e.g., wear and tear, faulty design).
✔ Premium Costs: Compare premiums but avoid choosing a policy solely based on price—adequate coverage is crucial.
✔ Claim Process: Check how efficiently the insurer processes and settles claims.
3️⃣ Seek Expert Advice
CAR Insurance policies can be complex, so consulting an insurance broker or advisor can help:
✔ Identify the best policy based on your project’s risks.
✔ Clarify technical terms and policy conditions.
✔ Negotiate better premium rates and coverage options.
4️⃣ Read the Policy Document Thoroughly
Before finalising your purchase of a particular policy, carefully review:
✔ Terms & Conditions: Understand your responsibilities under the policy.
✔ Exclusions: Be aware of risks that are not covered to avoid surprises.
✔ Claim Process: Familiarise yourself with claim filing procedures and required documents.
5️⃣ Choose the Right Add-Ons (Optional Coverages)
Depending on your business needs, you may require additional coverage, such as:
✔ Debris Removal: Covers the cost of clearing debris after an insured event.
✔ Escalation Costs: Protects against rising material costs due to inflation.
✔ Delay in Start-Up (DSU): Compensates for financial losses due to project delays caused by insured risks.
✔ Off-site Coverage: Covers off-site equipment against accidental damage .
6️⃣ Purchase the CAR Insurance Policy
Once you have selected the right policy, complete the purchase process:
✔ Submit Required Documents: Provide project details, risk assessments and safety protocols.
✔ Pay the Premium: Ensure timely payment to activate coverage.
✔ Keep a Copy of the Policy Document: Store it safely for reference during claims.
Key Factors to Consider Before Buying CAR Insurance
To make an informed decision, evaluate:
✔ Reputation of the Insurer: Choose a provider with a strong track record in construction insurance.
✔ Coverage Limits: Ensure the policy covers the full value of your project.
✔ Policy Exclusions: Be aware of risks not covered to avoid claim disputes.
✔ Claim Settlement Efficiency: Select insurers known for quick and hassle-free settlements.
✔ Customisation Options: Opt for policies that allow you to add specific coverages based on your project’s risks.
Common Mistakes to Avoid While Buying CAR Insurance
🚫 Underinsuring Your Project: Ensure the sum insured reflects the full project value.
🚫 Ignoring Exclusions: Failing to check exclusions can lead to claim denials.
🚫 Choosing the Cheapest Premium: Lower premiums often mean reduced coverage—balance cost and protection.
🚫 Delaying Coverage: The policy should be active before construction starts to ensure full protection.
How to File a Claim Under Contractors’ All Risk Insurance?
If an insured event occurs, follow these steps for a smooth claim process:
✔ Notify the Insurer Early: Report the incident as soon as possible.
✔ Document the Damage: Take clear photographs/videos and collect witness statements.
✔ Submit Required Documents: Include invoices, police reports (if applicable) and a completed claim form.
✔ Do Not Repair Before Inspection: The insurer may send a surveyor to assess the damage—avoid making alterations unless emergency repairs are necessary.
✔ Follow Up with the Insurer: Stay in touch to ensure timely claim processing and settlement.
Final Thoughts
Buying Contractors’ All Risk Insurance is essential for protecting your business, projects and financial stability. By assessing your risks, comparing policies and seeking expert advice, you can secure the best coverage tailored to your needs.
A well-chosen CAR Insurance Policy not only protects your assets but also enhances your credibility, ensuring long-term success in the competitive construction industry.
Secure your projects today with the right CAR Insurance policy! 🚧🔧🏗️
