Site insurance is a crucial consideration for everyone working on a construction project, from the planning stages through the final product. As the scale of the project increases, so does the number of possible dangers that could arise.
Unexpected events such as floods, fires, vandalism, and theft, may significantly increase the cost of any building project. As a contractor, you’ll still have to do the job and the client won’t pay twice, so you’ll have to pay out of pocket, even if it wasn’t your fault. Contractors’ all risks (CAR) insurance, also known as construction all risk insurance, can cover these expenditures for you.
If you’re wondering what is construction all risk insurance and how it may benefit you and your company, read on to learn more about this type of insurance so you can rest easy knowing that you’re covered.
What is Construction All Risk Insurance?
Construction all risk insurance is a kind of property insurance. It’s a necessary supplement to homeowner’s insurance, which often doesn’t cover damage to property while it’s being built or renovated. It’s also a protection for independent contractors.
Every time you take on a new client’s project, you should invest in CAR insurance. As a result, you won’t go bankrupt if a natural disaster, such as a fire or storm, destroys your building. A CAR insurance policy for building projects may help cover the costs of the following:
- Repairs;
- Broken, lost, or stolen construction equipment;
- Removal of debris;
- Inherent architectural or legal expenses.
The period of protection starts when the project begins and ends when it is finished. After that, your client’s building insurance should kick in. Construction all risk insurance isn’t a recurring payment like liability or contents coverage. Instead, you will be asked to estimate the duration of the event and charged a premium accordingly. Further fees might be imposed on extensions.
There are a number of insurance providers that won’t cover a building project after work has begun. If you’ve already started building, you can still get aid from certain specialty insurers; just don’t count on any discounts or retroactive coverage.
What Does Construction All Risk Insurance Include?
Strong gusts, for example, might knock down the framework and ruin your hard work. It might also ruin construction supplies and make them useless. A CAR insurance policy may cover the cost and pay for repairs and supplies.
Thievery, for instance, is a widespread problem in the construction industry. According to a study conducted on 100 construction companies, each company suffers thefts of licensed cars and equipment twice a year, costing an average of $25,900 for vehicles and $1,600 for items. Worst still, fewer than 25% of stolen equipment is ever found.
When a building site is unattended, thieves have an easy opportunity to steal valuable materials. They can try to rob construction sites of goods and money. Any damage caused by thieves is covered by the construction all risk insurance.
However, your construction site is vulnerable to more than just theft. It’s also possible that vandals may break in and destroy equipment and supplies. Intruders may ruin the construction by spray painting it or stealing several important supplies. The CAR insurance may cover some damage repairs.
It’s also possible that nearby fires can pose a threat. A lot of the materials used in building or remodeling a house are combustible, so this might swiftly ruin all of your hard work. Protect yourself from financial loss in the event of a disaster by purchasing construction all risk insurance.
What is Not Covered by CAR Insurance?
In general, construction all risk insurance will not cover the following products or situations:
- If a piece of machinery or a tool is forgotten at the construction site. The equipment you own is protected by your contents insurance. Hence, damage to or destruction of equipment is not often compensated for under construction all risk policy.
- Losses that occur before or after the start of construction. Assume you lose the building supplies for a project in a fire. As work has not yet begun, the materials are not covered by CAR insurance. In a similar vein, the policy no longer applies after construction is over.
- Faulty design. If the loss, damage, or destruction was caused by carelessness or a mistake, it is not covered by the construction all risk insurance. Often, compensation for this kind of loss is covered by professional liability insurance.
Final Thoughts
Whether you’re constructing a new building or doing major repairs on an existing one, you should invest in construction all risk insurance. This is applicable to both professional builders and DIYers.
General contractors have additional insurance, such as liability and property protection. However, theft or destruction of construction supplies, as well as vandalism to completed work, are not covered by this policy. Without the right insurance, you’ll have to pay for the expense of replacement out of pocket.
