Definition:Construction all risk (CAR)
🏗️ Construction all risk (CAR) is a broad-form property insurance policy designed to cover physical loss or damage to a construction project during the course of building works. Often referred to interchangeably with construction all-risk insurance or builder's risk coverage, a CAR policy typically protects the contract works themselves, materials on-site and in transit, temporary structures, and — depending on endorsements — existing property of the project owner. It is a cornerstone of construction-sector risk management and is routinely required by project owners, lenders, and surety providers before ground is broken.
📐 CAR policies operate on an all-risk (or "open perils") basis, meaning they cover any cause of loss unless specifically excluded. Common exclusions include wear and tear, defective design (though resulting damage may be covered under certain wordings), war, and nuclear events. The sum insured generally reflects the full completed value of the project, including materials and labor, and adjusts as the project progresses. Deductibles vary by peril — with higher retentions often applying to natural catastrophe perils such as earthquake or flood. Policies can be arranged on a single-project or annual basis, and they may include third-party liability sections covering bodily injury or property damage to adjacent structures caused by construction activities.
💼 Given the scale and complexity of modern construction projects, CAR coverage is a major line of business for specialty insurers and Lloyd's syndicates with engineering expertise. Underwriters evaluate project-specific variables — soil conditions, contractor track record, construction methodology, and catastrophe exposure at the site location — to price the risk accurately. For brokers arranging CAR programs, structuring the right combination of primary and excess layers, coordinating with reinsurers, and ensuring that all project stakeholders are properly named as insureds is critical to avoiding coverage gaps that could derail a multi-million-dollar development.
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