Contractors all risks (CAR) insurance covers the physical risks of a construction or building project: the works themselves, the materials, and the plant and tools on site, against loss or damage from causes such as fire, theft, flood and accidental damage. It is the core cover for anyone carrying out construction work, protecting the value tied up in a project that is not yet finished and not yet the client’s.

A part-built project is uniquely exposed: it is valuable, it is on an open site, and it is not covered by an ordinary buildings policy until complete. Contractors all risks fills that gap for the life of the works.

What does contractors all risks insurance cover?

It typically covers the contract works, the permanent and temporary materials, and often the plant, tools and equipment on site, against sudden and accidental loss or damage. Common causes covered include fire, storm, flood, theft and vandalism, and accidental damage during the works. Cover usually runs from the start of the works to practical completion or handover.

Who needs contractors all risks cover?

Builders, contractors and tradespeople carrying out construction, renovation or extension work, and sometimes the property owner commissioning it, depending on the contract. Many construction contracts require CAR cover to be in place, and specify who must arrange it, so the contract terms are the starting point.

What else usually goes with it?

Contractors all risks is normally bought alongside the liability covers a construction business needs: employers’ and public liability for injury to workers and third parties, and, where design is involved, professional indemnity. CAR covers the works and property; the liability covers deal with harm to people. A construction business generally needs both.

Does it cover plant and tools?

Often, but not always automatically. Plant, tools and equipment can be included within a CAR policy or covered under a separate plant section, and hired-in plant may need specific cover because you can be liable for it under the hire terms. It is worth checking exactly what is included rather than assuming everything on site is covered.

Getting the cover right

The right CAR cover depends on the value of the works, the type of project and what the contract requires, and it needs to sit correctly alongside the liability covers. A broker can build the package for the way you work. To review your commercial cover, call 01795 841 310 or speak to the team.

The three sections of a typical policy

Most contractors’ policies are built from three parts. You can buy them together or separately.

Section What it protects Points to check
Contract works The permanent and temporary works, and materials on site or in transit The maximum contract value, whether materials off site are included, and cover after practical completion
Plant and tools Your own plant, tools, site huts and hired-in plant Separate limits for owned and hired plant, and conditions for theft at night
Liability Public liability for injury or damage to third parties, and employers’ liability for your own staff The limits required by your contracts and how labour-only subcontractors are treated

Employers’ liability is compulsory if you have employees. GOV.UK says the cover must be at least £5 million from an authorised insurer. See our guide to employers’ liability requirements and public liability insurance.

JCT contracts: who insures the works

The building contract usually decides who buys the works cover. Read the insurance clauses and contract particulars before you price the job.

The JCT 2016 Standard Building Contract has three works insurance options:

  • Option A: new building work, where the contractor insures the works in joint names.
  • Option B: new building work, where the employer insures the works in joint names.
  • Option C: work to or extending an existing building. The employer insures the works on an all risks basis and the existing structure and contents against specified perils, such as fire, storm and flood. The 2016 edition also allows the parties to use a bespoke replacement schedule instead.

The JCT Minor Works Building Contract 2016 follows the same pattern under clauses 5.4A to 5.4C. It requires the works to be insured for their full reinstatement value, with professional fees added at 15% unless the parties state otherwise. Clause 5.3 requires the contractor to insure its liability for injury and property damage.

Two further points catch people out:

  • Joint names. A joint names policy treats both employer and contractor as insured, so the insurer cannot recover its outlay from either of them. A standard annual policy does not do this unless it is set up to.
  • Damage to neighbouring property without negligence. The Minor Works contract does not provide for insurance against damage to adjoining property caused by the works where nobody was negligent. JCT suggests the Intermediate Building Contract where that risk needs covering.

Option C can be difficult where the employer is a tenant and the landlord insures the building. Check that the landlord’s insurer will accept the works before the contract is signed.

Who needs it: some UK examples

  • A builder converting a loft under a homeowner contract, where the homeowner’s own buildings insurer must be told and may need to cover the existing structure.
  • A main contractor building a small housing scheme for a developer under a JCT contract with Option A.
  • A groundworks subcontractor whose main contractor requires proof of works and plant cover before starting on site.
  • A shopfitter carrying out a tenant fit-out in a shopping centre, where the landlord’s insurance and the lease restrict what can be insured.
  • A freeholder or management company running major works on a block of flats, who needs the works and the existing building protected at the same time.
  • A self-builder managing their own trades on a new home.

Exclusions to check

  • Defects: the cost of putting right faulty design, workmanship or materials is usually excluded. Many policies cover resulting damage to other parts of the works, but how much depends on the wording.
  • Wear and tear and mechanical breakdown of plant.
  • Theft conditions: plant left unsecured, or tools left in vans overnight, are often excluded or limited.
  • Existing structures: not covered unless the policy specifically includes them.
  • Delay and financial penalties: liquidated damages and lost profit are not part of the works cover.
  • Terrorism: JCT notes that joint names and all risks policies often exclude it, apart from a small amount of cover on some wordings.
  • Design liability: needs professional indemnity insurance.

What affects the premium

  • Annual turnover and the largest single contract value.
  • Type of work: heat work, basements, demolition, timber frame and work near water usually rate higher.
  • Whether you work on existing buildings or new build only.
  • Site security, storage of plant and materials, and fire precautions.
  • Value of owned plant and the annual cost of hired-in plant.
  • Claims history and the excess you accept.

Annual or single project cover

An annual policy covers all contracts started during the year, up to a maximum contract value. It suits contractors running a steady flow of jobs.

A single project policy covers one contract for its full build period. It is common for larger jobs, for developers and self-builders, and where the contract demands a policy set up for that site.

Looking for contractors all risks insurance?

Tell us what your business does and we will look for cover that fits. Call 01795 841 310 (Monday to Friday, 9am to 5pm) or send us your details and we will come back to you.

Ask for a quote

How a claim works

  1. Make the site safe and stop further damage.
  2. Report theft or malicious damage to the police and get a crime reference.
  3. Notify your broker or insurer straight away, with photos and the contract details.
  4. Keep damaged items until the insurer or loss adjuster has seen them.
  5. Agree the repair plan. Get consent before major reinstatement work if the policy requires it.
  6. Submit costs for labour, materials and plant hire, then receive settlement less the excess.

A worked example (hypothetical)

A builder is halfway through a two-storey timber frame extension under a JCT Minor Works contract. A fire starts in a skip overnight and spreads to the frame and the stacked materials.

The contract used clause 5.4B, so the homeowner insures the existing house against specified perils and the works on an all risks basis in joint names. The fire damage to the house goes to the homeowner’s insurer. The burned frame and materials go to the works cover. The builder’s own plant section pays for a damaged mixer, and the builder’s programme moves back by several weeks.

Because both parties were named on the works policy, the insurer cannot pursue the builder for the cost of the fire.

Frequently asked questions

Is contractors all risks insurance a legal requirement?

No. There is no law requiring it, but most building contracts do. Employers’ liability is the cover the law requires if you have employees.

Who should insure the works under a JCT contract?

It depends on the option chosen in the contract particulars. Under Option A the contractor insures; under Options B and C the employer does.

Does CAR cover the existing house when I build an extension?

Usually not. The existing structure is normally insured by the owner, and the owner’s insurer should be told about the works before they start.

What does joint names mean?

Both the employer and the contractor are insured under the same policy. The insurer cannot then recover a paid claim from either of them.

Does CAR cover faulty workmanship?

Not the cost of correcting the faulty work itself. Many policies do cover damage that the defect causes to other parts of the works.

Can I get cover for a single job?

Yes. Single project policies cover one contract for its whole build period and are common for larger works and self-builds.

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