You’re bidding on a project, and the contract requires proof of insurance before work can even start. Or maybe you’ve already had a scare, stolen materials, storm damage to a half-finished structure, an accident on site, and you’re looking into coverage for the first time because of it. Contractors All Risk insurance is built for exactly this kind of exposure. Here’s what it actually covers, who typically needs it, and what affects the cost.
What Does Contractors All Risk Insurance Actually Cover?
Contractors All Risk, or CAR insurance, covers damage to a construction project’s materials and structure, third-party injury or property damage on site, and losses from events like fire, flood, or typhoon during the build. “All Risk” means the policy generally covers accidental physical loss or damage unless specifically excluded under the policy wording. It does not mean every type of loss is automatically covered.
On a typical project, this plays out in a few concrete ways: materials or equipment stolen or damaged before installation, structural damage from a fire or a major storm mid-build, or a third party, a passerby or a neighboring property, injured or damaged because of site activity. The phrase “all risk” describes how the policy is structured, covering everything unless specifically excluded, rather than only covering a short named list. That’s a meaningful difference from a named-perils policy, but it doesn’t mean unlimited coverage.
Contractors All Risk insurance generally consists of two main sections. Material Damage covers accidental physical loss or damage to the contract works, construction materials, and temporary works. Third-Party Liability covers the insured’s legal liability for bodily injury or property damage suffered by third parties arising from the construction activities.
Common Exclusions
Readers often assume “all risk” means unlimited coverage, so it helps to know upfront what’s typically left out. Typical exclusions include:
● Defective design, unless specifically endorsed
● Faulty workmanship, although resulting damage may be covered depending on the policy
● Normal wear and tear
● Mechanical or electrical breakdown of construction equipment, unless separately insured
● War, terrorism, and nuclear risks
● Intentional acts
● Contractual penalties or liquidated damages
Who Actually Needs Contractors All Risk Insurance?
Project owners, general contractors, and subcontractors on construction projects typically need CAR insurance, and it’s often required contractually by clients, lenders, or developers, regardless of project size.
It’s easy to assume this only applies to large-scale commercial developments, but that’s not accurate. Mid-size and even smaller residential or commercial builds increasingly require proof of CAR coverage before a client, lender, or local permitting process will sign off. If you’re a contractor bidding on work, or a project owner financing a build, there’s a good chance a contract clause or lender requirement already assumes this coverage exists. Rather than guessing whether your project qualifies, it’s worth checking the specific contract or permit requirements early, since sourcing coverage after work has already started is more complicated than arranging it before the first delivery of materials.
How Is Contractors All Risk Insurance Priced and How Long Does It Last?
CAR insurance is priced based on the project’s value, duration, location, and risk profile, and coverage typically runs for the length of the construction period rather than a fixed annual term.
Unlike a yearly renewable policy, CAR coverage is usually mapped to the project timeline itself, starting when construction begins and ending at completion or handover, sometimes with a short maintenance period added afterward. Cost depends on a handful of factors: the total value of the project, how long it’s expected to take, the location and its exposure to weather or theft risk, and the type of construction involved.
The Material Damage Sum Insured is generally based on the full contract value, including permanent works, materials supplied by the principal, labor, freight, customs duties, and other costs necessary to complete the project.
Other underwriting factors that can affect pricing include the construction method, project type (building, bridge, road, warehouse, and so on), soil conditions, flood and earthquake exposure, claims history, the length of the maintenance period required, and the contractor’s track record.
Many CAR policies also include a Maintenance Period, during which the insurer continues to provide limited coverage for damage arising from defects discovered after practical completion or during maintenance operations, subject to the policy terms.
Because these variables shift from project to project, there’s no fixed price to quote in general terms. A broker can review your specific project details and put together an accurate quote rather than a rough estimate.
For related coverage on the property side, see our Property Insurance Playbook and Professional Liability Insurance guide, or reach out to
our brokers directly for a project-specific quote.
