The construction industry in India is one of the largest sectors contributing to economic growth, but it is also one of the riskiest. From infrastructure projects like highways and bridges to commercial and residential buildings, contractors face numerous challenges—accidents, equipment damage, natural disasters, and even legal liabilities.
One delay or mishap can cost crores and disrupt project timelines. This is where Contractor’s All Risk (CAR) Insurance becomes a vital part of risk management in construction.
What is a Contractor’s All Risk (CAR) Policy?
A CAR Policy is a comprehensive insurance cover designed for construction projects. It protects both contractors and project owners from sudden, unforeseen losses during the execution of construction work.
It is called “All Risk” because it covers a wide range of perils under one umbrella, unlike traditional insurance policies that only cover specific risks.
What Does a Contractor’s All Risk (CAR) Policy Cover?
- Material Damage
- Covers loss or damage to the construction site, materials, plant, and equipment due to fire, theft, explosion, flood, earthquake, cyclone, or accidental damage.
- For example, if a crane collapses on-site or material is destroyed in a flood, the policy compensates for the loss.
- Third-Party Liability
- Covers legal liability for third-party bodily injury, death, or property damage caused during construction.
- Example: A passer-by is injured by falling debris—the policy covers compensation and legal costs.
- Temporary Works
- Covers scaffolding, shuttering, and temporary structures used during construction.
- Surrounding Property
- Damage to property around the construction site due to construction activity is also covered.
What’s Not Covered under Contractor’s All Risk (CAR) Policy?
- Normal wear and tear of machinery
- Willful negligence or defective design
- War and nuclear risks
- Consequential losses (like delay penalties, unless add-on is purchased)
- Pre-existing damages before policy inception
Add-On Covers for Better Protection
In India, insurers offer various extensions to customize Contractor’s All Risk (CAR) policies, such as:
- Escalation Clause (to cover rise in construction costs due to delays)
- Loss of Profit due to Delay in Start-Up (DSU)
- Employee’s Compensation for workers on-site
- Cross Liability Cover when multiple contractors are involved
Why CAR Policy is Crucial for Construction Risk Management
- Financial Protection – Prevents unexpected costs from eating into project budgets.
- Legal Compliance – Many project owners and government tenders in India mandate Contractor’s All Risk (CAR) coverage.
- Stakeholder Confidence – Banks, investors, and clients prefer projects backed by insurance.
- Business Continuity – Ensures work resumes quickly after accidents or natural calamities.
- Covers Both Parties – Protects interests of both the contractor and project owner under a single policy.
Conclusion
Construction projects in India face unique risks—from natural disasters like floods and earthquakes to on-site accidents and liability claims. A Contractor’s All Risk (CAR) Policy acts as a safety net, ensuring that one unforeseen event does not derail months or years of effort.
For contractors, builders, and project owners, Contractor’s All Risk (CAR) insurance is not just a protection tool—it’s an essential part of risk management and business sustainability.
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