Conclusion and essence of construction all-risks (CAR) insurance policy

2Scope / Description

This standard describes the nature of Construction All Risks (CAR) insurance, a voluntary insurance product that covers risks associated with construction, renovation, reconstruction, installation, demolition, and similar activities. Despite its name, "All Risks," it does not provide coverage for all possible types of loss. Compensable loss is limited to direct property damage to the structure under construction, construction materials, equipment, and related items. In essence, CAR insurance is property insurance, except for certain optional additional coverages.

It is possible to add business interruption coverage to CAR insurance, which compensates for lost profits and fixed costs resulting from an insured loss. However, this standard does not address insurance for business interruption risk.

Additionally, liability insurance coverage may be attached to CAR insurance. Liability insurance covers risks arising from damage caused to third parties during construction, renovation, reconstruction, installation, demolition, and similar activities. Liability insurance is a separate line of coverage. Compensable losses under liability insurance include direct property damage arising from either property damage or bodily injury. Moreover, it covers legal costs incurred in defending or contesting claims made against the insured.

Liability insurance can be included as part of the CAR insurance policy or issued as a separate policy alongside the CAR policy. Given that the insured risks under CAR and liability insurance differ, this standard addresses them separately.

CAR insurance policies and related liability insurance policies may be issued as open-yearly premium policies or on a project-specific basis.