Insuring a construction project begins before machinery arrives on site. During tender and contract preparation, project risks, participants’ obligations and insurance requirements should be reviewed so that appropriate protection and its cost can be included in the project plan in good time.
CAR insurance (Contractors’ All Risks) is designed to insure construction works against sudden and unforeseen material damage within the agreed policy terms. Third-party liability cover can also be arranged. The term ‘all risks’ does not mean every loss is covered: the policy, conditions, exclusions and additional clauses determine the protection provided.
1. Review the contract and participants’ obligations
The first step is to review tender documents, a draft contract or the signed construction contract. Establish who arranges insurance, whose interests need to be covered and what requirements the owner or lender imposes.
Review the positions of the owner, main contractor and subcontractors, the required liability limits and the duration of cover. Involving a broker before pricing a tender helps the contractor assess insurance costs more realistically and avoid having to meet unanticipated requirements later.
2. Gather project information
A clear description and value of the works, location, timetable, construction methods and basic technical documents are needed to prepare a submission to insurers. Information on existing structures, neighbouring property, underground services and work that may increase risk is particularly important.
The sum insured should reflect the value that needs to be insured under the policy terms. Consider materials or equipment supplied by the owner and possible changes in value during the project.
3. Define the required cover
Project information forms the basis of a submission that clearly distinguishes material damage insurance from liability insurance.
Depending on the project, consider natural hazards, existing property on which work is carried out, debris removal, additional expenses following a loss, damage to neighbouring property and underground services, and liability between insured participants. Employers’ liability, testing and commissioning, and maintenance-period cover require particular attention.
Contractual penalties, the cost of correcting defects and loss of income from project delays must not be assumed to form part of standard CAR cover. The availability and terms of insurance for these exposures need separate review.
4. Obtain and compare proposals
Insurers should receive a comparable submission with the same information and requested scope of protection. Proposals are then compared on their actual content: insured risks, exclusions, limits, sublimits, deductibles and additional obligations.
A lower premium may result from narrower cover, a higher deductible or the omission of an important clause. Differences should therefore be explained before a decision is made, so the client understands the protection offered for the quoted price.
5. Check and arrange the policy
Before work starts, check that final documents reflect the accepted proposal and project requirements. Particular attention should be given to insured parties, the subject matter and location, sums insured, limits, periods and agreed clauses.
Resolve discrepancies and uncertainties with the insurer and document them appropriately. Check the conditions for the start of cover, including premium payment obligations.
6. Monitor insurance during works and handover
Project changes may require insurance changes. An increase in the value of works, extended deadlines, a change in construction methods or suspension of works should be reported to the insurer in good time, with any need for policy amendments reviewed.
Pay particular attention to partial handover and bringing a property into use, as these may affect when certain covers end. Extensions of insurance and maintenance-period protection should not be assumed: they must be clearly agreed.
7. Respond when a loss occurs
If an event occurs that may lead to a claim, notify the insurer promptly, take necessary steps to limit the loss and preserve evidence. Notification, documents and further action should follow the specific policy and the insurer’s instructions.
The broker’s role includes helping prepare notification, gather documents and communicate during the process.
Status Broker helps align insurance with the actual project, from reviewing initial requirements and comparing proposals to monitoring the policy and supporting claims.