When it comes to construction projects, there are always potential risks and hazards that can lead to damages, injuries, and financial losses. To protect themselves from such risks, contractors often opt for contractor all risk (CAR) insurance policies. These policies provide coverage for a wide range of risks, including damages to the building, injuries to workers, and third-party liabilities. However, like any insurance policy, there are clauses that every contractor needs to be aware of in order to understand what is covered and what is not.
Here are some common clauses that you should pay attention to when choosing a CAR insurance policy:
1. Insured Peril: The policy should specify what types of perils or risks are covered. This includes damages to the building due to fire, flood, earthquake, and other natural disasters. It may also include damages due to theft, vandalism, and other man-made causes.
2. Exclusions: While the insured perils are covered, it is equally important to understand the exclusions. This includes damages due to war, nuclear events, and intentional damage caused by the contractor.
3. Deductibles: Like any insurance policy, CAR policies also have deductibles. This refers to the amount that the contractor needs to pay out of pocket before the insurance policy applies. For instance, if there is a fire damage of $10,000 and the deductible is $2,000, the contractor needs to pay $2,000 and the remaining $8,000 will be covered by the insurance company.
4. Limits of Liability: The policy should specify the maximum amount of coverage that the insurance company will provide. This is the limit of liability. You need to ensure that the limit of liability is sufficient to cover the potential risks involved in your construction project.
5. Contractors Plant and Equipment: This clause provides coverage for the contractor`s equipment and machinery used in the construction project. It covers damages and losses due to accidents, theft, and other causes.
6. Third-party Liability: This clause provides coverage for damages caused to third parties, such as neighboring properties or individuals who may be affected by the construction project.
7. Delay in Start-up: This clause provides coverage for delay in completion of the project due to unforeseen circumstances, such as natural disasters or labor strikes.
In conclusion, a contractor all risk insurance policy is an essential tool to protect contractors from potential risks and hazards during construction projects. However, it is equally important to understand the policy`s clauses and exclusions before deciding on the right policy for your project. As a contractor, it is always advisable to seek advice of an insurance professional experienced in risk management.