Contractor’s All Risk Policy: Everything You Need to Know 

Infrastructural and construction projects are in full swing as both the government and private contractors are quite busy these days. The scale of the construction work usually depends on the type of engineering or construction works carried out by the contractors. However, most types of these works involve risks such as accidental damage to the surrounding property, injury to the workers due to negligence, material damage, and more. The machinery and equipment used for the construction are also prone to damages. To protect contractors from the financial losses caused due to such unforeseen events, insurers provide a contractor’s all risk policy these days. 

What is a contractor all risk policy?

Contractor’s all risk insurance policy is an extensive policy that provides coverage to the construction equipment, construction plant, and material damages. It also includes coverage for bodily injuries or property damage caused to a third party on the construction site. It is applicable to the contractors who undertake civil engineering projects. Architects, engineers, and financial agencies who fund construction works can also avail this insurance to minimise the financial risks posed by uncertainties of such projects. The additional costs of construction incurred due to repair works, collapsed structures, maintenance, etc. are minimised by this policy. As a result, it helps the contractors to complete their projects on time. 

Why is a contractor’s all risk policy required?

India is a developing country and infrastructural works are being carried out on a large scale. The construction of sewage tanks, roads, bridges, flyovers, metro lines, and many other infrastructural projects are carried out by the state and central governments. At the same time, contractors and subcontractors also look after the private works of buildings, commercial spaces, gardens, and more. 

We cannot undermine the fact that these construction sites are exposed to risks like accidents, damages due to faulty work, losses due to material damage, and bodily injuries sustained by a third-person during maintenance work. These risks also pose a threat to ongoing projects as they can lead to major financial losses. The contractors usually do not have enough resources to manage the financial losses and liabilities claimed by a third-party. To prevent the stoppage of work due to these unforeseen incidents, it is better for them to get a comprehensive contractor all risk policy coverage

Concrete mixing equipment, wheel loaders, and many other types of expensive equipment and machinery are used on the construction sites. These equipment can be damaged due to accidents and thereby incur a significant financial loss to the contractor. The contractor’s all risk insurance policy also covers the on-site equipment that are used to carry out the construction works. It also covers the losses incurred to restore the faulty electrical and plumbing works. 

Key Features of Contractor All Risk Policy 

  1. Complete coverage: The contractor’s all risk policy provides complete coverage to construction works from start to end. It covers the project from the initial storage works till project completion. It secures the financial losses during each phase of the construction and allows contractors to execute their plans without any worries.
  1. Cover for material damage: The works carried out in the construction site can be damaged due to improper materials and plans. The damage to the construction property due to accidents can lead to heavy financial losses to the contractors. The risks associated with material damage to one’s own property can be minimised with a contractor’s all risk policy
  1. Third-party cover: The bodily injuries/death or property damage caused to a third-party during the construction work is also covered by this policy. It also covers the legal liabilities claimed by a third-person for a bodily injury or property damage caused within the construction premises. The construction workers are also covered under the contractor all risk policy. 
  1. Add on covers: Different types of add on covers can be included in a contractor all risk policy coverage. Some of the popular add on covers that are availed with this policy include cover for:
  • Damages caused due to repair works during construction and maintenance 
  • Damages inflicted on surrounding properties during the construction works 
  • Damages inflicted to construction equipment 
  1. Multiple risks are covered: A contractor’s all risk policy covers multiple risks and liabilities. For example, the damages caused due to fire and other perils are covered under this policy. The contractor’s all risk insurance policy coverage includes water damage, material loss due to human errors or negligence, losses caused due to earthquakes, floods, and other natural disasters, defective or faulty construction works, and more. 

Characteristics of Contractor’s All Risk Policy 

  1. Categories of risks in construction: Unknown site conditions, worker injuries, accidents, badly designed scope, and incomplete drawings are some of the key risk categories associated with construction works. All these risk categories are covered by contractor’s all risk insurance. 
  1. Perils covered under contractor’s all risk policies: The perils covered by a contractor’s all risk policy include:
  • Fire and related perils
  • Fire, shock, and earthquakes
  • Floods, cyclones, tempest, storms
  • Structure collapse
  • Human mistakes or negligence
  • Faulty construction 
  • Wet risks due to water damage
  1. Eligibility: The projects in which the value of the construction works is greater than 50% of their entire value are eligible for the contractor’s all risk insurance policy

Types of contractor’s all risk policies 

A contractor’s all risk insurance policy covers both first-party and third-party damages. Here are some other types of construction insurance policies in the market:

  1. Advance loss of profits: This type of construction insurance policy safeguards a construction company from the losses incurred due to delay in starting projects. The project’s standing costs and loss in the net profit are considered while calculating the sum assured for this type of policy. 
  1. All risk cover for projects: This type of construction insurance plan provides all risk coverage for onsite accidents and damages. It also covers the damages caused due to natural calamities, collapse, fire and associated perils, and more. All risk cover for construction projects does not include a third-party coverage like a contractor’s all risk policy

Contractor’s All Risk Insurance Plans Available in India 

Policy NameSum Insured Policy Tenure Key Features 
Contractors All Risk Policy by Reliance General Insurance As per the project scale and coverage requirements From project commencement to project completion Policy plans with tenure of more than 12 months are available.
Covers construction plants machinery with sum insured of Rs. 25 lakhs or 5% of the sum insured (whichever is lower)
Add-on covers for debris removal, maintenance cover, cover for precious documents, design defect cover, etc. can be availed to widen the scope of policy coverage. 
The premiums can be paid in instalments for plans with tenures longer than 12 months 
Contractor’s All Risk Policy by ICICI Lombard As per the project scale and coverage requirements From project commencement to project completion Risk engineers are employed to provide service to clients of the construction sector.
Locations risks involving burglary, fire, thefts, and housebreaking are covered by this policy. 
Insulation failure, explosions, short circuits, electricity leaks, and other types of testing and commissioning risks are also covered under this policy. 
Storms, earthquakes, cyclones, floods, landslides, and some other acts of god are also covered under this policy. 
Contractors All Risk Policy Online by Digit Insurance As per the project scale and coverage requirements From project commencement to project completion A comprehensive cover including material damages and third-party liability is provided by this policy. 
The online claim settlement process is quick and seamless. 
Zero documentation policy while subscribing to the insurance plans. 
Contractors All Risk Policy in India by HDFC ERGOAs per the project scale and coverage requirements From project commencement to project completion Multiple civil engineering projects are covered under this policy. 
Extensions to include coverage for terrorism acts, inland transit, escalation, and more can be availed. 
The payment for the premiums can be done through instalments when the policy period is more than 12 months.
Option to extend the cover for manufacturers or suppliers is also available. 
Contractors All Risk Policy by TATA AIG
As per the project scale and coverage requirements From project commencement to project completion The coverage is also provided to temporary works carried out on the construction sites.
Add on covers can be availed to insure the damages caused to the surrounding properties. Debris expenses, extended maintenance, extra custom duty, and third-party liability can also be covered by availing the add-on covers. 
Convenient application, claim settlement, and policy renewal process. 

Inclusions & Exclusions of Contractor’s All Risk Policy?

What is covered?

  • Fires and associated perils, earthquakes, floods, storms, cyclones, and other natural disasters are covered by this policy. The damages caused due to human mistakes or negligence are also covered. 
  • Legal liability filed by a third-party due to bodily/fatal injuries or property damage inflicted within the construction premises are covered by this policy.
  • Contractor’s all risk plans also cover the physical injuries sustained by the construction works during onsite works. The damages inflicted on a third-person’s property due to the ongoing works are also covered. 
  • Losses inflicted due to material damage are also covered provided that they do not exceed the sum insured as specified in the policy documents. 
  • Some policies also include coverage for thefts, burglary, and housebreaking. 
  • Losses caused due to explosion, electricity leakage, short-circuits, and failure of safety equipment are also covered under this policy. 

What is not covered?

  • The accidents or damages caused due to vehicles are not covered by a contractor’s all risk policy
  • This policy usually does not cover losses caused due to bad quality or defective material. Damages caused due to faulty casting, faulty design, and poor artistry are also not included in the coverage. 
  • The damages caused due to regular wear and tear are not covered by this policy. 
  • The additional expenses incurred to modify, improve, or extend an ongoing work are not included under contractor all risk policy coverage
  • Losses caused due to improper use of inventory are not included in the policy coverage. 
  • The financial losses incurred due to damages caused by wars, nuclear perils, terrorism, and similar events are not included in the contractor’s all risk insurance policy coverage
  • Contractor’s all risk plans do not cover losses caused due to damage of drawings, bills, and contracts. The legal liabilities filed by a third-party due to violation of contracts are also not included in the coverage. 
  • Damages caused due to deliberate or willful acts are excluded from this policy. 
  • Financial losses due to the damages inflicted during strikes, riots, and other man-made disasters are also excluded from the contractor’s all-risk policy. 
  • Damages caused by faulty cranes, collisions, and falling objects are also not included under the contractor’s all risk insurance policy coverage

Who needs a contractor’s all risk insurance policy?

Different types of stakeholders like financial firms, engineers, contractors, subcontractors, etc. can avail the contractor’s all risk insurance policy to safeguard themselves from the expenses caused by the unprecedented onsite risks. This type of policy can also be customised to cover the suppliers, vendors, and manufacturers. 

Usually, ongoing residential and commercial buildings, airports, sewage plants, water tanks, bridges, flyovers, and other types of construction and infrastructural projects are covered by this policy. 

The coverage can be provided to a single project or multiple projects are specified by the contractor while buying the policy. The subcontractors who undertake electrical, plumbing, painting, and other types of works in an ongoing construction work can also be protected by this policy. Most of the time, the property owners who assign the task of construction works also get this policy. Construction companies also get it to safeguard themselves financially from untoward incidents. 

Things to consider while buying contractor’s all risk policy

  1. Safety precautions: As a contractor, you must ensure that all the safety standards are met on the construction site. Insurance companies are willing to provide insurance to the contractors who take all the precautions while completing a construction project. It will help you to get the contractor’s all risk policy at an affordable premium. 
  1. Type of work: The type of construction work you undertake determines the kind of risk your construction business is exposed to. For example, the damages and risks associated with the construction works of a bridge are usually higher than the risks and damages caused with house construction. The sum insured opted by you should vary as per the nature of works and risks involved in the construction work. 
  1. Location: Some locations are more susceptible to natural calamities like floods, earthquakes, cyclones, etc. Therefore, the location of the construction project also determines the kind of coverage you should get from the insurance policy. The premium charged by insurers to cover projects in a high-risk location will also be higher. 
  1. Extra benefits: The insurance companies that provide additional contractor all risk policy benefits for the convenience of the insured can be preferred over others. For instance, you can look for the insurers that provide a mobile app and 24/7 online assistance to file claims and seek solutions to queries and complaints seamlessly. 
  1. Compare policies: It is recommended that you compare multiple contractor’s all risk plans before getting one. It will help you get an insurance plan with attractive benefits and adequate coverage. You can also use a contractor all risk policy premium calculator to find the most economical plans as per your coverage requirements.  

How to raise the contractor’s all risk policy claims?

Adhere to the following steps while claiming for a contractor’s all risk policy:

Step 1: Contact the insurer immediately after an incident 

You should connect with the insurer immediately after an incident that has caused damage or can potentially result in a third-party liability. Once you have contacted the insurer, you can provide them with the details of the incident. At the same time, you need to inform them about your contractor all risk policy details like policy number. These days, the option to raise a claim via website or mobile app is available. 

Step 2: Get the claim registration number 

Do not forget to note down the claim registration number provided by the insurer after raising a claim. This number will help you track the status of the claim afterwards. 

Step 3: Submit the documents 

Along with the claim form, you should also submit the documents and evidence that support your claim. If you have captured photographs of the damage, they can also be used as evidence of the incident. 

Step 4: Damage assessment 

Once you raise the claim, the insurer will arrange for a supervisor who assesses the damage and informs the company about the legal and financial liabilities. Once the survey or assessment report is completed, the claim settlement will reach the final stage. The assessment report will contain the details about the expenses incurred to the policyholder along with the other costs. 

Step 5: Wait for the settlement process to be completed 

The insurer may require a week or more to complete the formalities associated with the policy claims. You should be patient and provide complete support to the insurer during this period. 

Documents to be submitted to support the claim request 

Here are some documents that can support your claim request:

  • FIR copy in case of burglary, thefts, or housebreaking
  • Medical reports in case a worker or third-party gets injured onsite 
  • Details of the property damages or financial loss incurred to the policyholder 
  • Technical reports verifying claims for breakdown of equipment or machinery 
  • Repair or replacement assessment 
  • Purchase invoices and delivery receipts of materials

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