Contract All Risks (CAR), and Erection All Risks (EAR) insurances cover accidental physical loss or damage to works under construction (Section1) caused by damage such as fire, storm, lightning, malicious damage, impact, theft on-site or stored remotely, and include limited cover while in transit.
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Both policies cover third-party liability (Section 2) for unrelated parties’ injury or property damage and the time-limited maintenance period required to correct defects, errors, and emissions. The Contractors All Risk Insurance(CAR) insurance covers building work, whereas Erection All Risk Insurance (EAR) covers the assembly of plant and machinery.
Why Get Car/Ear Insurance?
Construction and erection projects necessitate extensive protection against potential damage. With CAR/EAR Insurance coverage, you can run things safely and protect your projects and investments.
> Key features
CAR/EAR insurance covers the maintenance period, during which the contractor bears maintenance liability under the works contract.
During the maintenance period, insurance coverage is limited to loss or damage caused by either a) the contract or b) performing minor adjustments, normal making goods, replacing substandard quality parts, or correcting deficiencies to achieve guaranteed performance and fulfil contractual obligations.
> Benefits
Contractor All Risks (CAR)
- Covers construction risks for buildings such as offices, factories, shopping malls, and residences.
- Civil engineering projects include the construction of roads, railways, quays, tunnels, dams, floodgates, airports, underground structures, and plazas.
Erection All Risks (EAR)
- Covers risks caused during installation and/or installation of various infrastructures.
- Plant and factory construction, etc.
- Erection of bridge superstructures, steel towers, other structures, etc.
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> Coverage
Insurance coverage should be provided for any damage that occurs during the construction process.
Material Loss: Cover almost any unexpected and sudden material loss or damage to the insured property on the site.
Additional Coverage: Third Party Liability: When the insured is legally obligated to pay as a result of –
(a) accidental bodily injury or illness to third parties (whether fatal or not)
(b) the unintentional loss or damage of third-party property
- Occurring in direct connection with the construction or erection of the items insured
- Occurring on or near the site
- During the Period of Coverage
> Eligibility
Construction firms, builders, and associated trades such as plumbers, electricians, and engineering firms typically purchase the policy. Still, it can also be purchased on a principally controlled basis, with the project owner insuring on behalf of the contractor and their associated trades. It is quite common among owner-builders.
- Owners or Employers
- Contractors
- Sub-Contractors
- Consultants, Engineers
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> Product Highlights
Premium Rating – Determined by Total Contract Value (TCV) at completion, which includes:
- Engineering Expenses
- Suppliers’ cost of goods or works (i.e., material cost), adding tax and custom duties
- Insurance and transportation expenses
- Construction/erection costs (i.e., labour cost)
- Various other expenses (e.g., commission)
- Service Equipment provided by the Principal
Construction/Erection Works starts
- Directly at the start of the work
- After the subject matter of insurance has been unloaded from the conveyance on the site
Expires – When the principal takes over or puts the works into service or on the date specified in the schedule
Policy Term – The maximum policy term, is one year (Renewable yearly)
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Difference between CAR and EAR Insurance
CAR Insurance
- Contractors All Risk Insurance provides comprehensive and adequate protection against loss or damage to –
contract works, construction plant and equipment/construction machinery, and third-party claims for property damage/bodily injury arising from the execution of a civil engineering project.
- CAR policy is hugely beneficial to consulting engineers, architects, and financiers.
- It contributes to lower overall construction costs while providing effective financial protection for all parties involved.
EAR Insurance
- This policy provides complete coverage by insuring against risks that may arise during the erection or testing.
- It protects engineering contracts financially in the event of an accident.
- The Erection All Risk policy applies to the construction and testing of manufacturing units or individual machinery.
- The policy also covers third-party legal liability arising from project activity during the policy period.
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Conclusion
Contractors All Risks Insurance / All Risks Insurance being an all risks insurance policy covers all damage to the property being built or erected during the construction period. As a result, one can choose any insurance that is appropriate for them!
