Insurance Advisory Newsletter – Contractor’s All Risk Insurance: April 2025
1. Overview
Contractor’s All Risk Insurance (CAR Insurance) offers project-specific protection against material damage and third party liability during construction. In India’s expanding infrastructure landscape, it functions as a key contractual and risk mitigation tool, safeguarding stakeholders from unforeseen disruptions and financial loss.
Unlike annual policies, CAR Insurance is generally aligned with the full duration of a construction project, from commencement to completion, thereby ensuring continuous coverage. The sum insured reflects the total contract value, including materials, equipment, duties and labour, with premiums based on project complexity, location and the contractor’s risk profile. Accurate valuation and tailored structuring are critical to avoid underinsurance and achieve effective risk allocation.
When embedded into the wider project risk management strategy, CAR Insurance enhances financial resilience, supports compliance and reinforces disciplined project delivery in capital-intensive sectors.
2. Types of Coverages
CAR Insurance may be tailored to suit the scale and complexity of a construction project. Single Project Coverage applies to a specific site and lapses upon completion, making it suitable for standalone developments. Annual or Multi-Project Coverage, by contrast, consolidates protection for multiple sites under a single policy, often preferred by contractors with ongoing operations. Comprehensive Coverage extends protection across all major risks, including material damage and third-party liability,while Extended Coverage enables endorsements for specific exposures such as defective workmanship or natural catastrophes. Together, these frameworks allow stakeholders to align the coverage availed with project-specific risk profiles.
3. Significance of CAR Insurance for businesses engaged in construction and manufacturing
CAR Insurance offers construction and manufacturing businesses end-to-end protection against material damage, operational disruptions, and third-party liabilities throughout the lifecycle of the project. It consolidates coverages for all key stakeholders which include project owners, contractors, subcontractors, developers, lenders, financiers and such third parties claiming damages for bodily injury or property damage. This enables business continuity and safeguarding timelines.
As infrastructure projects scale across India, CAR Insurance is increasingly vital, not just for meeting contractual and regulatory requirements, but also for signalling financial discipline and risk-readiness to clients, investors, and partners.
4. Comprehensive overview of coverages and exclusions
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COVERAGES |
EXCLUSIONS |
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Material Damage |
Third-Party Liability |
General |
Coverage-specific |
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Material Damage:
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Third-Party:
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Effective risk management in construction requires a structured approach that aligns financial protection with sound risk allocation, especially related to contractual risks and regulatory obligations. CAR Insurance plays a pivotal role, but its value depends on a clear grasp of its scope and exclusions. Integrating CAR Insurance within a broader risk framework enhances financial resilience, supports project execution, and promotes long-term operational stability amid growing infrastructure demands.
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Disclaimer:
This newsletter is for informational purpose only and should not be treated as legal advice or opinion. No part of this newsletter should be considered an advertisement or solicitation of professional services of LegaLogic.
