Contractors All Risk Insurance UK: What It Is and What It Covers

What Is Contractors All Risk Insurance?

Contractors all risk (CAR) insurance is a specialist construction insurance policy combining two key risks in a single policy: the physical structure being built (contract works or material damage section) and claims from third parties arising from the construction activities (public liability section).

The contract works section covers the partially-completed building and materials on site against accidental damage, fire, flood, theft, and storm. If fire destroys work completed to date, or a storm brings down partially-erected steelwork, the cost of reconstruction is covered. Without this cover, the main contractor bears the full cost of rebuilding from the point of loss.

The public liability section covers claims from members of the public, adjacent property owners, and others who suffer bodily injury or property damage as a result of the construction activities. A neighbouring building damaged by vibration from piling, a pedestrian injured by falling debris, or underground services damaged by excavation work would all give rise to covered claims under the public liability section.

Contract Works Cover: What Is Included?

The contract works (material damage) section covers:

• The permanent works - the structure being constructed including all materials and components incorporated into the building
• Temporary works - scaffolding, formwork, hoarding, and temporary structures erected to facilitate construction
• Materials on site - materials delivered and awaiting incorporation, subject to storage and security conditions
• Plant and equipment - some CAR policies include contractor own plant and hired-in plant; others require separate policies for these

The sum insured under contract works should represent the full reinstatement cost at practical completion, not just the contract sum. The contract sum typically excludes professional fees, demolition costs, and site clearance, all of which form part of the reinstatement cost following a major loss. Underinsurance at this level can result in proportionate settlement of claims.

Public Liability Cover: What Is Included?

The public liability section covers: bodily injury to third parties caused by construction activities; property damage to third-party assets including neighbouring buildings, underground services, roads, and utilities; and legal defence costs for claims within the policy scope.

Standard PL limits in construction range from GBP 5 million to GBP 10 million. Public sector and local authority contracts frequently specify a minimum of GBP 10 million. Major infrastructure projects may require GBP 20 million or higher. The required indemnity limit should be specified in the construction contract particulars and checked before tendering.

What Is Not Covered?

• Design errors - defects arising from a design fault are excluded from CAR. Professional indemnity (PI) insurance covers design liability. Design-and-build contractors must arrange both PI and CAR.
• Defective workmanship - the cost of rectifying the defective work itself is excluded, though consequential damage to other parts of the works caused by the defect may be covered depending on the specific policy wording.
• Employers liability - injury to the contractor own workers is not covered by CAR. A separate mandatory EL policy is required under the Employers Liability (Compulsory Insurance) Act 1969.
• Cyber risk - increasingly relevant on digitally-managed projects but not covered under standard CAR. Separate cyber insurance is required for this exposure.
• Terrorism - typically excluded. Pool Re provides commercial terrorism cover for properties in Great Britain through reinsurance arrangements.

Who Arranges CAR Insurance?

The allocation of CAR insurance responsibility depends on the construction contract. Under JCT Standard Building Contract forms, the contract particulars specify whether the contractor arranges cover, the employer arranges a joint names policy covering both parties, or (for work to existing structures) split arrangements apply with the employer covering the existing structure and the contractor the new works.

On smaller domestic and SME projects, the main contractor typically includes CAR under their annual contractor programme policy, which blankets all projects up to a maximum contract value. On larger projects or those procured by public sector bodies, project-specific CAR is commonly required, ensuring that named subcontractors are also covered under a single policy for the project duration.

How Much Does CAR Insurance Cost?

CAR premiums are expressed as a rate per cent of contract value, paid as a one-off premium. For standard residential and commercial projects, market rates typically range from 0.2% to 1.0% of the contract sum.

Indicative 2026 costs:

• Residential extension, GBP 200,000 contract value: approximately GBP 400 to GBP 2,000
• New-build residential, GBP 1 million contract value: approximately GBP 2,000 to GBP 10,000
• Commercial fit-out, GBP 500,000 contract value: approximately GBP 1,000 to GBP 5,000

Factors increasing premiums: specialist or high-risk work (demolition, piling, underpinning); proximity to water, railways, or utilities; long contract periods; sites with high theft or vandalism risk; and contractors with poor claims histories.

Frequently Asked Questions

Is contractors all risk the same as contract works insurance?

Not exactly. Contract works insurance covers damage to the structure under construction. Contractors all risk is broader, combining contract works with public liability in one policy. In practice the terms are often used interchangeably by brokers and insurers, but when comparing policies confirm that both sections are included in what is being quoted.

Do subcontractors need their own CAR policy?

It depends on the main contract and the subcontract terms. If the main contractor has a project-wide CAR policy including unnamed subcontractors, subcontractors may be covered. If the subcontract requires subcontractors to provide their own cover, a separate policy is needed. Subcontractors should always check the subcontract agreement and request written confirmation from the main contractor if they believe they are covered.

Does CAR cover materials stored off-site?

Standard CAR policies cover materials at the construction site. Materials at an off-site fabrication yard, warehouse, or storage location may not be covered unless specifically included as an extension in the policy schedule. This is particularly relevant for prefabricated elements and bespoke materials with long lead times and significant value.

What is the defects liability period and does CAR cover it?

The DLP is the period after practical completion during which the contractor must remedy defects. Some CAR policies extend cover into the DLP for accidental damage occurring in that period, but they do not cover the defects themselves. Check the policy schedule for this extension and its duration.

Does CAR cover damage to existing structures on a renovation project?

Not automatically. Standard CAR covers the new works. Damage to an existing structure being renovated requires a specific extension or separate property insurance. Under JCT contracts, the employer typically arranges cover for existing structures through their own buildings insurance, making it important to confirm this arrangement before work begins.