What Is Contractors All Risk Insurance?
Contractors all risk insurance (CAR insurance) is a specialist short term insurance policy that covers construction and engineering projects against physical loss or damage to the works in progress, materials on site, and third party liability. It is a standard requirement on most construction contracts in South Africa, including those governed by JBCC, NEC3, GCC, and FIDIC. Cover runs from the date of site establishment through to practical completion.
If you have just won a construction contract or are preparing to submit a tender, contractors all risk insurance (commonly known as CAR insurance) is almost certainly a requirement before you can start on site. But what exactly does it cover, what does it not cover, and how do you make sure your policy actually meets what your contract requires? This guide answers those questions in plain language, specifically for construction and engineering contractors working on projects in South Africa.
What Does Contractors All Risk Insurance Actually Cover?
A standard contractors all risk policy covers three main areas: the works themselves, the materials and equipment on site, and third party liability.
The works section covers physical loss or damage to the structure being built, from foundations to finishing. If a storm damages a completed floor slab, or a fire breaks out in a partially built building, the CAR policy responds to the cost of rebuilding or repairing that portion of the works.
Materials and equipment on site covers materials waiting to be installed, such as bricks, steel, pipework, and fittings, as well as temporary works like scaffolding and formwork. This section of the policy is particularly important on long duration projects where material values fluctuate as deliveries arrive and work progresses.
Third party liability covers your legal liability for injury to people or damage to property that is not part of the contract works. If a member of the public is injured on or near the site, or neighbouring property is damaged during construction, this section of the policy responds.
What Does My Contract Require for Contractors All Risk Insurance?
Most construction contracts in South Africa, whether governed by JBCC, NEC3, GCC, or FIDIC, include specific insurance requirements your CAR policy must meet before the employer will allow you to start on site. Getting this wrong means delays, disputes, and in some cases losing the contract altogether.
JBCC contracts typically require the policy to be in joint names, meaning the employer, main contractor, and all nominated sub-contractors are covered under a single policy. This prevents a situation where one party’s insurer pursues another party’s insurer after a claim, which can tie up cash flow and delay the project for months.
NEC3 and NEC4 contracts tend to have detailed insurance schedules attached to the contract itself. Each line of the schedule specifies a minimum sum insured or limit of indemnity. Your CAR policy needs to match those figures precisely, not approximately.
GCC contracts (used primarily on public sector civil engineering projects) require SASRIA cover to be included on the policy. SASRIA covers civil commotion, strikes, and public disorder, which a standard CAR policy excludes by default. If your project is on a government site and your policy does not include SASRIA, you have a gap that could leave you personally liable for losses during any unrest.
Public liability limits also vary by contract. Many employers and municipalities now require a minimum of R10 million or R20 million in public liability cover. Check your contract schedule before you arrange the policy, not after.
What Does Contractors All Risk Insurance Not Cover?
A CAR policy has exclusions that catch contractors off guard if they are not prepared for them.
Plant and machinery Your excavators, TLBs, cranes, and compactors are not automatically covered under a CAR policy. Plant is typically insured separately under a Plant All Risk (PAR) policy. If you have mobile plant on site and it is damaged or stolen, your CAR policy will not respond unless plant cover has been specifically endorsed onto it.
Existing structures If you are building an extension or renovating an existing building, the existing structure is generally not covered under the CAR policy for the new works. The employer typically insures the existing structure separately. Make sure you know who is insuring what before work begins.
Consequential loss If construction is delayed because of an insured event, the CAR policy covers the cost of repairing or rebuilding the physical damage, but it does not cover the financial losses caused by the delay, such as lost revenue, penalty clauses, or extended preliminaries. Delay in Start Up (DSU) cover can be added to address this, but it must be requested separately.
Defects A CAR policy is not a warranty. If work fails because of poor workmanship or a design error, the policy will not pay for the repair. This is one of the most common misunderstandings contractors have about CAR insurance.
How Do I Know If My Contractors All Risk Policy Is Correct?
Three things go wrong most often when contractors arrange CAR insurance in a hurry.
The sum insured is set too low. The sum insured on a CAR policy should reflect the full contract value, including professional fees, free issue materials supplied by the employer, and an allowance for escalation over the contract period. A policy set at the original bill of quantities value without escalation may be underinsured by the time a claim arises eighteen months into a three year project.
The policy period is too short. Construction projects overrun. If your policy expires before practical completion and you have not arranged a renewal or extension, you have an uninsured site. Build an extension mechanism into the policy from the start.
The joint names structure is not set up correctly. If the employer’s name is not on the policy and a claim arises, the employer’s insurer can pursue your insurer, or you personally, for recovery. A correctly structured joint names policy prevents this. It requires specific setup and wording and it is not automatic.
Frequently Asked Questions: Contractors All Risk Insurance
Does a standard CAR policy automatically cover my sub-contractors?
No, a standard contractors all risk policy does not automatically cover sub-contractors. For sub-contractors to be protected, the policy must be structured as a joint names policy with the employer, main contractor, and all nominated sub-contractors listed on the schedule. Without this structure, a sub-contractor who causes damage on site may not be covered, exposing both them and the main contractor to uninsured liability. This structure must be set up correctly from inception and cannot be added retrospectively after a claim.
How do I ensure my cover meets JBCC or NEC contractual requirements?
Check the insurance schedule in your contract before arranging cover. JBCC contracts require the policy to be in joint names, include SASRIA cover, and meet minimum public liability limits. NEC3 and NEC4 contracts attach a detailed insurance schedule specifying minimum cover amounts line by line. Your CAR policy must match those figures exactly. A mismatch means you are technically in breach of contract before work begins. If you are unsure what your contract requires, contact a specialist before arranging cover. Getting it right from the start is far simpler than amending a policy after the employer has flagged a deficiency.
What is the difference between "Works" cover and "Plant" cover?
Works cover protects the structure being built and all materials that will form part of the completed works handed over to the employer at practical completion. Plant cover protects the equipment used to build it, including excavators, cranes, TLBs, concrete mixers, and other machinery. These are two separate policies. A CAR policy covers the works. A Plant All Risk (PAR) policy covers the plant. On most active construction sites you need both running at the same time. Some contractors assume their plant is covered under the CAR policy and only discover the gap when a piece of equipment is damaged or stolen.
When does the CAR policy end and operational insurance begin?
A contractors all risk policy runs from the date of site establishment to practical completion, which is the point at which the employer formally accepts the completed works. After practical completion, the employer’s property or building insurance takes over. The handover is not always clean in practice. If the contract includes a defects liability period, which most JBCC and NEC contracts do, the CAR policy may need to be extended or a separate defects liability period extension arranged. The transition should be planned before practical completion, not after.
Why is a dedicated insurance administrator necessary for a construction site?
CAR insurance is more complex than standard commercial or motor insurance. Contract requirements under JBCC, NEC, and GCC are specific and must be matched precisely. The joint names structure requires specialist setup that is easy to get wrong without experience. Insurer relationships matter because not all insurers are accepted by government entities and municipalities, meaning a poorly placed guarantee may be rejected by the employer. The cost of a wrongly structured CAR policy is almost always higher than the cost of specialist guidance from the start.
Partner with the Engineering Insurance Experts
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CAR insurance is arranged through trusted South African insurer partners, correctly structured for your contract type, with cover confirmed quickly. Most contractors have their policy in place within 24 to 48 hours of making contact.
Contact our team today to discuss your upcoming project and how we can support your contractual compliance.
