Contractors all risks insurance (CAR) covers the building work itself while it's being built. If a fire, flood, storm, theft or vandalism damages the work in progress or the materials on site before handover, CAR pays to put it right. It's the policy main contracts most often require. It's also the one smaller builders most often confuse with public liability.
This guide explains what CAR covers and what it doesn't, and how it differs from public liability, employers' liability and professional indemnity. It covers when a contract makes it your responsibility, including the JCT insurance options and "joint names" wording. It also covers how to set the sum insured and the exclusions that cause disputes, especially around defects. It's written for UK builders, sole traders, subcontractors, developers and clients who need to understand what they're asking for.
If you've been asked to provide contract works or CAR insurance for a job, or your annual policy is up for renewal, speak to us. We'll check what the contract actually requires and look for cover from the insurers on our panel.
The short answer
What it is: property insurance for the works under construction, plus materials on site and often plant, tools and temporary buildings, from the start of the job to handover.
Also called: contract works insurance, contractors' all risks, construction all risks, or "the works" section of a contractor's combined policy.
Who buys it: builders, main contractors, sole traders doing extensions or refurbishments, developers and self-builders. Sometimes the client buys it instead, depending on the contract.
Is it compulsory? Not by law. In practice the building contract, the client, a lender or a developer often requires it.
What it doesn't cover: injury to people or damage to other people's property (that's public liability), injury to your staff (employers' liability), design mistakes (professional indemnity), or simply fixing poor workmanship.
Single-project or annual: you can insure one contract, or buy an annual policy that covers every job up to a stated contract value.
What contractors all risks insurance covers
CAR is "all risks" in the sense that it covers loss of or damage to the insured property from any cause that isn't specifically excluded. The insured property is usually:
Item | What it means | Notes |
|---|---|---|
The contract works | Permanent works, such as the extension, new building, fit-out or refurbishment you're carrying out | Covered from when work starts until practical completion or handover |
Temporary works | Scaffolding, formwork, propping, hoarding and site set-up needed to build the permanent works | Check whether scaffolding owned by a subcontractor is included |
Materials on site | Materials delivered and waiting to be built in | Some policies also cover materials in transit or stored off site, often with a lower limit |
Own plant and tools | Plant, equipment and tools you own | Often a separate section or a sub-limit |
Hired-in plant | Plant hired in under hire conditions that make you responsible for it | Usually a separate section, sometimes including continuing hire charges |
Temporary buildings | Site huts, welfare units and their contents | Often included up to a set limit |
Employees' tools and effects | Personal tools belonging to workers | Usually a small sub-limit |
Most CAR policies also include extensions such as debris removal, professional fees to reinstate damaged works, extra costs of working faster to recover lost time, and cover during the defects or rectification period for damage you cause while going back to fix snags.
The kinds of loss CAR is for
A fire in a half-finished kitchen extension destroys the new roof timbers and the materials stacked inside.
A storm brings down a newly built gable wall before the roof ties it in.
Thieves strip copper pipe and a boiler from a refurbishment over a weekend.
A burst on the new plumbing floods freshly plastered walls and laid floors before handover.
Vandals set fire to a site cabin and damage the scaffold.
In each case the problem is damage to the works, the materials or the kit, which you'd otherwise have to pay to put right before you can finish the job.
What CAR doesn't cover
Not covered by CAR | What covers it instead |
|---|---|
Injury to members of the public, or damage to third parties' property (including a neighbour's house or the client's existing building in some contracts) | Public liability insurance. See the note on existing structures below |
Injury or illness to your own employees | Employers' liability insurance, which is compulsory if you employ people |
Mistakes in design or specification that you're responsible for | Professional indemnity insurance, if you design or take on design responsibility |
Just putting right defective workmanship or materials | Not insurable as such. See the defects section below |
Wear and tear, gradual deterioration, mechanical breakdown of plant | Not covered, or covered by a separate engineering or plant breakdown policy |
Penalties for late completion, liquidated damages | Not covered. Some specialist delay covers exist for larger projects |
Loss of the client's rent or profits after a delay | The client's own delay in start-up cover, if any |
Existing structures
This is a frequent cause of disputes on extensions and refurbishments. If you're working on an existing house or building, damage to the existing structure is often not "the works". Depending on the contract, the existing structure may need to be insured by the owner's property insurer, by you under your public liability (which may exclude property in your care, custody or control or being worked on), or by a specific extension to your CAR policy. Before you start, check who's responsible for the existing building and whose policy covers it, especially on JCT contracts.
The defects problem
Every CAR policy excludes the cost of putting right defective design, workmanship or materials. How far the exclusion goes varies a lot between wordings, and it matters more than almost anything else in the policy.
The wording often comes from a standard family of defects exclusions. The ones most commonly seen in the UK market are the London Engineering Group (LEG) clauses, LEG 1, LEG 2 and LEG 3:
LEG 1 (outright defects exclusion): excludes loss or damage due to defects, and also any damage that results from the defect. This is the narrowest cover.
LEG 2 (consequences defects exclusion): excludes the cost that would have been incurred to fix the defective part immediately before the loss, but covers resulting damage to other parts of the works.
LEG 3 (improvement defects exclusion): excludes only the extra cost of improving the original design, workmanship or materials. This is the widest cover and the least common for smaller contractors.
Example: a defective bracket causes a section of new ceiling to collapse. Under a LEG 1 type wording, nothing may be covered. Under a LEG 2 type wording, the bracket isn't covered but the damaged ceiling below may be. When you're comparing policies, ask which defects wording applies.
When the contract makes you buy it
Most of the time, CAR comes up because a building contract says who has to insure the works. The most common UK standard forms are the JCT contracts, which give a choice of insurance options. In broad terms:
Option A: new buildings. The contractor insures the works in the joint names of the employer and contractor.
Option B: new buildings. The employer (the client) insures the works in joint names.
Option C: work to existing structures. The employer insures the existing structure and the works. Recent editions allow for different arrangements, for example where the employer is a homeowner or tenant who can't arrange joint names cover.
Check the edition of the contract and the contract particulars. The option selected there decides who insures what. If you're a main contractor and Option A applies, you need a policy that can be put in joint names with the employer. Under Options B and C, it's still worth checking what the client's insurance actually covers before you start, and whether your own policy needs to fill any gaps.
Joint names and waiver of subrogation
"Joint names" means both parties are insured under the same policy, so the insurer can't pay one and then pursue the other for the same loss. Main contracts often also require subcontractors to be recognised as insured, or for the insurer to waive subrogation rights against them, for specified perils such as fire. If you're a subcontractor, ask whether the main contractor's CAR policy covers you, for which perils, and what excess you'd have to pay.
Non-negligent liability cover
Some JCT contracts also ask the contractor to buy insurance for the employer against damage to neighbouring property caused by the works where nobody was negligent, for example subsidence or vibration from piling. This is a specialist cover arranged in the employer's name. Your public liability policy usually won't cover it, because public liability depends on negligence.
Annual policy or single project?
Option | Suits | Things to check |
|---|---|---|
Annual contract works policy | Builders and contractors doing a steady run of similar jobs | The maximum contract value per job, the types of work and the total value of work insured over the year |
Single-project (one-off) policy | Larger jobs above your annual limit, developers, self-builders, one-off client requirements | Period of insurance, maintenance or defects period, and whether the policy can be extended if the job overruns |
Combined contractor's policy | Smaller contractors who want CAR, public liability, employers' liability and plant in one place | Each section's limit and excess, and whether the contract works section meets every client's requirements |
Our contractor insurance guide covers the liability side of a combined policy for trades and building firms in more detail.
Setting the sum insured
The sum insured for the works should be the full reinstatement value of the works at their most valuable point, usually just before completion. That isn't always the contract sum. Things to build in:
The contract value, including variations you expect to be added.
Materials supplied by the client that become part of the works, if you're responsible for insuring them.
Professional fees needed to redesign or supervise reinstatement.
Debris removal and site clearance after a loss.
Inflation and cost escalation if the job runs over many months.
VAT, if it can't be recovered.
For an annual policy, the key figure is the maximum value of any single contract. A job above that limit needs to be agreed with the insurer before it starts, or insured separately.
Plant: owned and hired in
If you hire plant, read the hire terms. Standard plant hire conditions commonly make the hirer responsible for loss of or damage to the plant while it's hired, and for the hire charges while it's out of action. That's a liability that sits with you, not the hire company. CAR policies and combined contractors' policies often deal with it in a separate hired-in plant section with its own limit. Check:
the maximum value of any one item of hired-in plant
whether continuing hire charges are covered
security conditions, such as immobilisers or keeping plant in a locked compound
whether plant is covered on the road between sites
Our guides to scaffolding contractor insurance, electrician insurance and plumbing and heating engineer insurance cover the tools and plant side for those trades.
Exclusions and conditions that cause disputes
Every wording is different. These are the points that most often matter after a claim:
Defects. The defects exclusion wording, as above.
Theft conditions. Theft from an unattended site or vehicle may only be covered with signs of forced entry, or between certain hours, or with specific security in place.
Unoccupied or paused sites. If work stops for more than a set period, cover may be restricted.
Water and flood. Some sites have flood exclusions or higher excesses, especially near rivers or with deep excavations.
Hot works. Many policies have conditions for welding, cutting, torch-on roofing and other hot works, such as permits, fire extinguishers and fire watches after the work.
Excesses. Theft and storm excesses are often higher than the standard excess.
Existing structures and contents. Often excluded unless extended.
Completed works after handover. Cover usually ends at practical completion or when the client takes possession, except for damage you cause during the defects period.
What insurers will ask
To quote, insurers usually want to know:
the types of work you do (new build, extensions, refurbishment, fit-out, groundworks, roofing and so on)
the maximum value of any one contract, and turnover
whether you work on existing buildings, occupied homes or listed buildings
whether you do any hot works, piling, basements, demolition or work at height above a certain level
the value of your own plant and tools, and hired-in plant
how sites are secured
your claims history
for single projects: the contract, the programme, the contract sum and the insurance clause
Answer accurately. Under the Insurance Act 2015, businesses have a duty to make a fair presentation of the risk. If something material is left out, an insurer may reduce or refuse a claim.
FAQs
What is contractors all risks insurance?
Insurance for the building work itself while it's being built, plus materials on site and often plant, tools and temporary buildings. It covers loss or damage from causes such as fire, flood, storm, theft and vandalism, unless they're specifically excluded.
Is contract works insurance the same as CAR?
Yes, in practice. "Contract works", "contractors' all risks" and "construction all risks" are used for the same type of cover. Some insurers use "CAR" for a wider policy that also includes public liability.
Do I need CAR insurance as a sole trader?
If you build or refurbish, you're carrying the risk of damage to your own work until handover, whatever your business structure. Many contracts also require it. Sole traders can buy contract works cover on its own or as part of a combined policy.
Does CAR cover the client's existing house?
Not usually as standard. Damage to the existing structure on an extension or refurbishment is often excluded from the works cover. Depending on the contract, it may sit with the homeowner's insurance, your public liability or a specific extension. Check before you start.
Does public liability cover damage to the works?
Generally no. Public liability covers your legal liability to other people for injury and for damage to their property. It usually excludes the work you're carrying out, and often property in your care or control.
Who should insure the works under a JCT contract?
It depends on the insurance option chosen in the contract particulars. In broad terms, Option A puts it on the contractor for new buildings, Option B on the employer for new buildings, and Option C on the employer for work to existing structures. Always check the edition and the particulars.
Does CAR cover poor workmanship?
No. The cost of putting right defective workmanship, materials or design is excluded. Depending on the defects wording, damage caused to other parts of the works as a result of a defect may be covered.
When does contractors all risks cover end?
Usually at practical completion, handover or when the client starts using the works, whichever comes first. Many policies continue to cover damage you cause while you're on site during the defects or rectification period.
Talk to us about contract works cover
Tell us about the work you do and the contracts you sign, or send us a contract insurance clause you're not sure about. We'll explain what it requires, check your existing cover against it and look for contract works cover from the insurers on our panel. Speak to us.
Meshed is a trading name of Mesh'd Limited, authorised and regulated by the Financial Conduct Authority (FRN 1033248). We charge a flat 10% broker fee. This guide is general information for England and Wales unless stated otherwise. It isn't legal advice, and policy wordings vary between insurers.
Vincent Liu
Co-founder & CTO
