Right! After a day’s work using various infrastructures, man must rest. All these endeavours take place in one property or the other. The construction of every project inevitably involves so many players and focused activity. The downside of these should be managed thereof. Every project owner, financier, manager or contractor has a pecuniary interest in their construction project. Any physical damage to the project may have some financial repercussions on the interested parties. For this reason, a Contractors’ All Risks (CAR) Insurance is key to the success of every construction project. Examples of such projects include road construction, building of residential apartments, construction of an office complex and all forms of construction that use mainly concrete and non-prefabricated materials.
A CAR policy offers adequate protection against loss or damage to the project works itself, construction plants and machinery, and also third party property damage and/or injuries(including death), arising from the execution of the project.
As an ‘all risks’ policy, it covers every loss in connection with the project unless it is specifically excluded. Typically the following losses would be covered:
- Lightning, Explosion
- Bad Workmanship
Some common exclusions on the CAR policy includes:
- Loss due to nuclear reactions
- Loss due to war operations
- Faulty Design
- Wear and Tear
- Mechanical Breakdown of the machinery
The insurance period starts from the commencement date of the project and ends when the completed structure is handed over. Cover for the machinery, which is optional, starts when they are brought to the site, and expires when removed from site.
CAR policies, unlike most other property insurances, are not renewable,
It is possible to extend cover to include a maintenance period. Here, the insurance company shall be called upon to pay for loss caused by the insured to the completed project in the course of using it, under the maintenance agreement.
An extended maintenance cover extension is also available for the project owner or contractor. This essentially, in addition to losses occurring during the maintenance period, covers losses occurring during the maintenance period but caused during the construction period. This extension is therefore more expensive than the regular maintenance cover extension.
An insurance company would normally require the following, though not exhaustive, to arrive at the premium payable:
- Contract Value (Sum Insured)
- Duration and Description of Project
- Replacement value of construction machinery/equipment (optional)
- Third Party Liability Limit
- Maintenance Period Duration (if required)
So the next time you undertake a construction project, ensure you are adequately covered under a Contractors All Risks (CAR) Insurance Policy.
By Isaac Adu, ACII MSc BSc