Contractors all risks insurance

Contractors all risks (CAR) insurance protects the thing every construction project has in common: value sitting exposed on site before it is finished and handed over. That value is the permanent and temporary works themselves, the plant and equipment used to build them, the materials waiting to be installed, and the liability the contractor carries for injury or damage while the build is under way. It is bought because standard property and liability policies do not follow work-in-progress onto a live site, and because contracts — JCT, NEC and bespoke — place a clear obligation on someone to insure the works. Where it goes wrong is rarely the headline peril. It is the sum insured that was never rebased, the indemnity or maintenance period that did not match the programme, the plant hired in but never declared, and the site security condition that was breached the night of a theft. This page sets out how the cover actually works, how underwriters price it, and where finance directors and contract managers most often get caught.

Key covers

• Contract works (the works) — permanent and temporary works under construction against fire, flood, storm, impact, theft, vandalism and accidental damage before practical completion and hand-over.
• Own and hired-in plant — excavators, cranes, tower lifts, generators and site cabins against damage and theft; hired-in plant should reflect the hire company's continuing hire charges and liability terms.
• Tools and small equipment — hand and power tools from site, van or store, subject to security and overnight storage conditions.
• Materials and free-issue — materials on site, and client free-issue items where you have assumed responsibility for them under the contract.
• Public liability — injury to third parties or damage to third-party property arising from the works, commonly £5m–£10m, subject to underwriter assessment and any contract requirement.
• Employers' liability — legally required where you employ staff or engage labour-only sub-contractors, standard on almost every construction risk.
• Existing structures — the surrounding or existing building on refurbishment, extension and fit-out work, which is a distinct exposure from the new works themselves.
• Removal of debris and professional fees — the cost of clearing a damaged site and the architect, surveyor and engineer fees to reinstate.
• Maintenance / defects period — cover continuing after completion while you return to make good defects during the contractual maintenance period.

What underwriters focus on

A contractors all risks account is priced on the shape of the work, not just the turnover figure. When we present a risk, these are the factors an underwriter weighs most heavily.

• Estimated contract value and the largest single contract. A contractor turning over the same total across many small jobs is a different risk from one carrying a single high-value contract; the maximum works value at any one site drives the loss potential and often the policy limit.
• Type of work and materials. New build, refurbishment, demolition, groundworks, roofing, timber-frame and cladding all sit at different points on the hazard scale. Timber-frame and any hot-works exposure raise fire concern; groundworks and basements raise water, ground movement and collateral-damage concern.
• Contract length and hand-over pattern. Long programmes leave value exposed on site for longer, and the indemnity and maintenance periods must match the real timeline rather than a default 12 months.
• Existing structures and adjacent property. Working within or onto an occupied building, or next to third-party property, changes both the works exposure and the liability exposure sharply.
• Site security and storage. Fencing, lighting, plant immobilisation, key control and material storage are read directly into theft and vandalism pricing, and often into conditions the policy then requires you to keep.
• Sub-contractor use and controls. Labour-only versus bona-fide sub-contractors affects both employers' and public liability rating, and underwriters expect evidence that sub-contractors carry their own cover.
• Claims history and management. Prior losses, and how they were controlled afterwards, materially affect terms; a clean record with documented method statements presents far better.

Common claims

Fire destroys part-built timber-frame or completed works before hand-over — contract works cover responds, subject to any hot-works and fire-precaution conditions.

Storm or flood damages open works or floods a basement dig mid-programme — contract works, with the sum insured needing to reflect the full reinstatement cost including debris removal and re-excavation.

An excavator or generator is stolen from a compound overnight — own or hired-in plant cover responds, subject to the security and immobilisation conditions being met; for hired plant, continuing hire charges may also be claimable.

Tools and materials are taken from a site container or van — tools and materials cover responds, subject to the overnight storage condition.

A member of the public is injured, or a neighbouring property is damaged by site works or a crane movement — public liability responds, subject to policy terms.

An operative is injured on site — employers' liability responds; RIDDOR reporting and a Health and Safety Executive interest are likely on a serious injury.

Water escapes from newly installed pipework and damages the existing building during a fit-out — existing structures and public liability may respond depending on how the loss arises and who owns the building.

The mistakes that cost you at claim

Underinsurance on the works. The single most common problem. Sums insured are set at contract price rather than full rebuild-and-reinstate cost, or they are never rebased as material and labour costs move. If the declared value is materially below the true value at risk, the insurer can apply average and cut the settlement proportionally — even on a partial loss. If you are not sure your figures still stand up, use our free underinsurance check before renewal, not after a fire.

The wrong indemnity or maintenance period. A default 12-month cover on an 18-month programme, or a maintenance period that ends before your defects-liability obligation does, leaves value uninsured at exactly the point the contract still holds you responsible.

Breached conditions. Hot-works permits, fire-watch periods, plant immobilisation, key control and overnight storage are conditions, not suggestions. A theft or fire where the required control was not in place can reduce or defeat the claim entirely.

Undeclared activities. Taking on demolition, deeper groundworks, work at greater height, or larger single contracts than declared changes the risk you asked the insurer to price. Undisclosed activity or a material change mid-term can leave a claim outside the terms actually agreed.

Assuming the contract insurance is someone else's job. JCT and NEC forms allocate the insuring obligation explicitly — sometimes to the employer, sometimes to the contractor, sometimes jointly. Insuring the wrong scope, or assuming the other party has it covered, is a live cause of uninsured loss. The policy must be read against the contract, not in isolation.

Hired-in plant gaps. Plant hire agreements pass continuing-hire and damage liability to the hirer. If that plant is not declared on your policy on the terms the hire contract demands, you can be left personally liable for charges and replacement.

Compliance and risk considerations

Employers' liability is a legal requirement. Under the Employers' Liability (Compulsory Insurance) Act 1969 most employers must hold employers' liability cover for staff, and labour-only sub-contractors are usually treated as employees for this purpose — central on almost every construction site.

Health and safety duties sit alongside the insurance. Duties under the Health and Safety at Work etc. Act 1974, and the site management duties under the Construction (Design and Management) Regulations 2015, do not transfer to an insurer. Good compliance evidence also presents the risk better to underwriters and supports any liability claim.

Working at height and other site controls. Where the work involves height, excavation or lifting operations, the relevant statutory duties and your method statements are both a legal matter and a factor in how liability underwriters view the account.

Fair presentation of the risk. Commercial insureds have a duty to make a fair presentation of the risk to the insurer. Disclosing turnover, activities, largest contracts, sub-contract arrangements and claims accurately is what keeps the policy responsive; a broker's job is to make that presentation properly on your behalf.

Contract-specific insurance clauses. Standard construction contracts contain detailed insurance provisions — who insures the works, the joint-names requirement, the level and the excess. The cover you buy should be checked against those clauses on each significant contract.

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