Explanation of Contractor's All Risk Insurance

The Meaning Contractor's All Risk Insurance

CAR Insurance is the insurance policy that covers all risks associated normally with a construction project. Issued commonly under the joint of a contractor and a principal (client), it usually also includes public liability insurance.

This article is a continuation of the first part of Contractor's All Risks Insurance and acted as an additional explanation. In the previous already alluded to the definition of Contractor's All Risks Insurance or CAR insurance along with a brief description and overview of the contents of the CAR insurance policy. So in this advanced section provide additional information and a more detailed explanation of the first part.

Risks (in Insurance), it means Situation where the probability distribution of a variable (such as burning down of a building) is known but its mode of occurrence or actual value (whether the fire will occur at a particular property) is not. A risk is not an uncertainty (where neither the probability nor the mode of the occurrence is known), a peril (cause of loss), or a hazard (agent or condition that makes the occurrence of a peril more likely or more severe). 

Risks in general, it means, probability or threat of a damage, injury, liability, loss, or other negative occurrence, caused by external or internal vulnerabilities, and which may be neutralized through pre-mediated action.

Policy (in Insurance), it means formal contract issued by an insurer that contains terms and conditions of the insurance cover and serves as its legal evidence. Formal contract is contract made legally enforceable by following a prescribed format, and by incorporating standardized conditions and provisions in its body. Insurance company that issues a particular insurance policy to an insured. In case of a very large risk, several insurance companies may combine to issue one policy.

Project it means planned set of interrelated tasks to be executed over a fixed period and within certain cost and other limitations.

Construction, in general, it means works of clearing, dredging, excavating, and g  rading of land and other activity associated with buildings, structures, or other types of real property such as bridges, dams, roads.

Contractor means Independent entity that agrees to furnish certain number or quantity of goods, material, equipment, personnel, and/or services that meet or exceed stated requirements or specifications, at a mutually agreed upon price and within a specified timeframe to another independent entity called contractee, principal, or project owner.

Principal in contracting or in insurance, it means a client who awards a contract to a contractor for completion of a job or project in accordance with terms of the contract. Also called owner.  Client in general inusrance, it means customer of a professional service provider, or the principal of an agent or contractor.

Liability Insurance is insurance policy that covers civil liabilities to third parties, arising from bodily injury, property damage or other wrongs due to the action or inaction of the insured. It covers only civil liabilities and not criminal liabilities.

What can be insured on a construction project

Project work in accordance with the contract, typically, include  :

1.   Main work

2.   Preparation work

3.   Temporary work

4.   Contractor's plant and equipment :  Great tools and other machineries used in
      the implementation of the work

5.   Third party liability  :  It covers disability / death / hospital expenses and third
      party property damages

6.   Material handling on-supply by the owner (Principal)

7.   Damage and or loss during the maintenance period

8.   Cost of clearance of debris

9.   And others.