Contractors' All Risks (CAR) Insurance Policy & Erection All Risks Insurance Policy (EAR)
Risk management survey has identified major exposure of physical damage to the property and associated liability risks to the principals, contractors, importers during the construction phase.
As in all businesses, there are various risks associated during the construction period and the maintenance period. The construction industry faces a unique set of challenges and risks, including unpredictable market conditions, and a shifting global economy.
Constructions projects are prone to variety of risks that can take a heavy toll on the finances of the business entity which may sometimes lead to even halt of the projects. Contractors’ All Risks Insurance Policy helps to avert the huge financial losses that the contractors suffer under such circumstances.
Erection during the construction phase is vital for the business. The risks attached to this are also significant. EAR policy protects your business against such losses and the coverage is available till it is re-erected.
Structured insurance programs viz., CAR and EAR come as a handy in the market to address for such eventualities.
The CAR policy protects the contractors and related parties involved in construction activity against the loss or damage to various civil engineering projects undertaken by them. The policy is suitable for all types of civil construction works ranging from small buildings to large commercial complex to roads to irrigation canals to big dams.
Whereas, the EAR policy (otherwise known as Storage Cum Erection (SCE) policy) protects the contractors and related parties and also to manufacturers and suppliers involved in erecting plants & machineries against the loss or damage due to any sudden, unforeseen and fortuitous causes to the property (ies) insured at the project site whilst being stored, erected, tested and commissioned. The policy is suitable for all types of electro – mechanical works such as power plants, electrification projects, pharmaceutical plants, other similar plants.
The transportation risks associated with plants, machineries & other project cargoes can be added to EAR policy / SCE policy.
The related parties can be either
- The principal / owner of the project.
- The manufacturer or supplier of machinery if they are responsible for construction, erection & commissioning of the project.
- The contractor(s) / sub contractor(s) entrusted for the construction, erection & commissioning of the project.
The policy is issued covering the completely erected value of the project and for the construction period & testing period.
This is a comprehensive policy, covers all risks of physical loss or damage due to the causes, some are illustrated below, except for those excluded.
- Location perils – Fire, lightning, burglary etc.
- Handling perils – Collision, impact, dropping, failure of cranes etc.
- Human element – Carelessness, negligence, faults, defective workmanship, malicious damage etc.
- Acts Of God – Storm, tempest, flood, inundation, earthquake etc.
- Operational perils – Short circuit, testing, explosion, insulation failures etc.
The projects works has become complex and fraught with challenges. Every stage starting from designing to procurement to erection etc can spring some surprises which may have strong financial impact on the project cost and timely completion. Accordingly, the policy can be extended to include many more covers, some are illustrated below –
- Additional custom duty.
- Third party liability including cross liability.
- Offsite storage / Storage at fabricators’ premises / workshop.
- Owners’ surrounding property.
- Clearance & removal of debris.
- Express freight, over time, holiday wages.
- Air freight.
- Expediting costs including air freight, express freight.
- 50 / 50 clause.
- 72 hours clause.
- Debris removal – specific sum has to be opted.
- Professional fees – specific sum has to be opted.
- Loss minimization expenses – specific sum has to be opted.
- Free automatic reinstatement up to full sum insured.
- Waiver of the contribution clause.
- Waiver of subrogation clause.
- Amendment in fire fighting endorsement.
- Construction plant & machinery (only for limited value & covers).
- Valuable documents – restricted to Rs 50.00 lacs.
- Design defect.
- Maintenance / Extended maintenance.
- Escalation in project value.
- Continuity in the cover during the operational phase for the unit / plant tested but awaiting integral testing.
- Cover for the contract works taken over and put to us.
Similarly, the policy can be extended to cover delay in start up, advance loss of profit etc to make it more comprehensive.