Professional Indemnity vs Contractors' All Risks
Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Last reviewed 2026-08-05
On a construction project these two covers sit side by side, yet they respond to completely different events. Confusing them is one of the most common reasons a contractor or consultant finds themselves uninsured when a claim lands. This guide explains the boundary between them, where they overlap, and which parties on a build typically need which.
The core difference: design liability vs physical damage
Professional indemnity responds to economic loss arising from a professional failing — a negligent design, a flawed specification, an incorrect calculation, or advice that turns out to be wrong. There need not be any physical damage at all. If a structural design is deficient and the client has to pay to redesign and rebuild, that pure financial cost is a PI matter.
Contractors' all risks responds to sudden, accidental physical loss or damage to the project itself — a fire on site, a flood, storm damage, vandalism, theft of materials, or a partial collapse during the works. It is a material-damage cover attached to the fabric of the build, its temporary works, plant and stored materials.
Put simply: if the loss is caused by getting the thinking wrong, look to PI. If the loss is damage to the physical works, look to CAR.
Side-by-side comparison
| Professional Indemnity | Contractors' All Risks | |
|---|---|---|
| Responds to | Negligent design, advice, specification or professional service | Accidental physical loss or damage to the works |
| Type of loss | Financial / economic loss | Material damage to property |
| Typical insured | Architects, engineers, surveyors, design-and-build contractors | Main contractor, often joint-named with the employer and subcontractors |
| Trigger basis | Claims-made (the claim must be notified during the policy period) | Losses-occurring (damage during the construction period) |
| What it protects | Your balance sheet against a claim by a client or third party | The value of the contract works and site materials |
| Illustrative limits | £1m, £2m or £5m each claim (often contract-driven) | Contract sum plus an allowance for debris removal and professional fees |
A worked example
Imagine a new commercial unit where a beam is under-specified. Two very different scenarios can follow:
- The design is wrong but nothing collapses. The error is spotted during a survey; the client incurs the cost of redesign and structural strengthening. That is pure financial loss flowing from a professional error — a PI claim against the designer.
- The works are damaged by fire before completion. A site fire destroys partially built structures and stored materials. There is no design fault — it is accidental physical damage to the works. That is a contractors' all risks claim.
Notice the grey zone: if a defective design actually causes physical collapse, insurers may argue over which policy responds. Well-drafted CAR wordings often exclude the cost of rectifying the defective part itself while covering resulting damage to sound work — and the design failing behind it points back to PI. This is exactly where having both covers, arranged coherently, matters.
Not sure which cover the contract actually demands? We'll read the requirements and match the policy to them.
Get a PI quote →Who needs which on a construction project?
The two covers rarely sit with the same party in the same way:
- Design consultants (architects, structural and services engineers, surveyors) carry PI because their exposure is professional error. They generally don't hold CAR.
- Main contractors usually arrange contractors' all risks — frequently in joint names with the employer and subcontractors under a JCT or NEC contract — to cover the physical works. If they also carry out design under a design-and-build route, they need PI as well.
- Design-and-build contractors are the classic case for holding both: CAR for damage to the works and PI for the design element they have taken responsibility for.
Your building contract will usually specify the required limits and, for CAR, who insures under the relevant JCT Insurance Option (A, B or C) or the NEC equivalent. Getting the named parties and the option right is as important as the limit. If you're unsure what your contract mandates, tell us the details and we'll check it.
What each policy does not do
PI does not pay to repair fire, flood or storm damage to the works, and it does not cover injury to people or damage to third-party property (that's public liability). Contractors' all risks does not pay for the cost of redesign, nor for the pure financial consequences of a design that was simply wrong but caused no physical damage. Each has a defined job; neither is a substitute for the other, and most construction businesses that carry design responsibility need both, alongside public and employers' liability.
Common questions
Can one policy cover both design errors and physical damage?
Not usually within a single standard product. PI and CAR are structured differently — one is claims-made economic-loss cover, the other is losses-occurring material damage. A design-and-build contractor typically holds them as two coordinated policies rather than one.
Does contractors' all risks cover defective workmanship?
CAR wordings commonly exclude the cost of rectifying the defective part itself, but many cover resulting damage to otherwise sound work. The exact position depends on the wording — the "defects exclusion" varies between insurers, so it's worth checking clause by clause.
Why does my building contract ask for PI after the project finishes?
Because PI is claims-made, a design error can surface years after practical completion. Contracts often require you to maintain PI for a run-off period (commonly six or twelve years) so cover exists when a latent defect claim arrives.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This guide is general information, not advice on a specific policy or a substitute for your policy wording.