Definition:Contractor's all risk insurance (CAR)
🏗️ Contractor's all risk insurance (CAR) is a comprehensive property insurance product designed to cover physical loss or damage to construction works, materials, plant, and equipment during the course of a building or civil engineering project. Widely used across global construction markets, CAR insurance typically operates on an all-risks basis — meaning it covers any peril not specifically excluded, rather than listing only named perils. In the insurance industry, CAR policies represent a cornerstone of construction insurance and are distinct from standard property policies because they must accommodate the evolving nature of the insured asset, which transforms from raw materials and excavation into a completed structure over the project lifecycle.
🔧 A CAR policy is generally structured in two or three sections. Section I covers the contract works themselves — the permanent and temporary works, including materials and labor — against damage from events such as fire, flood, storm, theft, collapse, and design error (in many markets). Section II provides third-party liability coverage for bodily injury or property damage arising out of the construction activities. Some policies include a Section III covering the contractor's own plant and equipment on site. The policy period typically runs from commencement of works through to completion and handover to the project owner, often with a maintenance or defects liability period extension that covers the contractor's obligation to remedy defects discovered after handover. Deductibles vary significantly depending on the nature of the project — a large infrastructure project such as a dam or tunnel will carry much higher deductibles and more tailored exclusions than a standard commercial building. In London and other major specialty markets, CAR placements often involve coinsurance arrangements where multiple insurers share the risk, with a lead underwriter setting terms. The product is known by different names in different regions: "builders' risk insurance" is the prevalent term in the United States and Canada, while "CAR" or "contractors' all risks" is standard in the UK, Europe, Asia, the Middle East, and much of the developing world.
💡 The importance of CAR insurance extends beyond protecting individual projects; it underpins the financial viability of the global construction sector. Lenders and project owners almost universally require CAR coverage before releasing funding, and its availability influences whether major infrastructure investments proceed at all. For insurers, the construction class presents both opportunity and complexity: projects can involve enormous sums insured, long policy periods, catastrophe exposures (earthquake, windstorm, flood in exposed geographies), and intricate contractual chains involving principal contractors, subcontractors, consultants, and project owners. Loss adjusting on CAR claims demands specialized engineering expertise, as damage to partially completed works can be difficult to assess and often involves questions about whether a deficiency arose from defective design, faulty workmanship, or an insured peril. In high-growth economies where construction booms drive demand — such as the Gulf states, China, India, and parts of Southeast Asia — CAR insurance is one of the fastest-growing segments of the non-life market.
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