Construction and installation risk insurance

Voluntary Construction and Erection All Risks Insurance (CAR/EAR)

For many — and here we mean construction and installation companies — construction and erection all risks insurance has long been an integral part of doing business. Every manager who cares about the company's reputation naturally tries to protect it against any unforeseen situations, which are commonplace in construction. Construction and erection all risks insurance belongs to voluntary insurance and, like other types in this class, is not regulated by law or regulatory legal acts, but only by the insurance company's own internal rules for construction and erection all risks insurance. This approach places considerable obligations on both the Policyholder and the Insurer, above all particular attention to the construction and erection all risks insurance contract, which must contain a number of important and necessary provisions that directly correspond to and are directly related to all construction processes of the facility for which the construction and erection all risks insurance contract is concluded. In this article we will try to cover all possible and most significant aspects of CAR/EAR insurance, but if this article does not fully answer your questions, contact the insurance brokers and agents in the association's registry or see other materials on www.asab.kz.

Why construction and erection all risks insurance is needed

Construction and erection all risks insurance is designed to protect both the construction and installation company itself and the client. This shows in the following:

A construction and installation company cannot always control the quality of materials or avoid technical accidents on site, let alone predict natural disasters, and a building or an unfinished construction project may suffer from any of these. During design and survey work, the condition of the soil may be assessed incorrectly, which can lead to subsidence, or design errors may be made that will also lead to changes in the condition of the construction project. It is impossible to turn back time to prevent this, but it is possible to avoid financial losses by taking out a construction and erection all risks insurance contract in advance.

The client is the most vulnerable party to the contract, apart from the possibility of the project's funding being frozen, yet the client is also the most interested in the quality of construction; therefore, in addition to monitoring all stages of construction, the client must make sure that the contractor has a CAR/EAR insurance contract.

Construction and erection all risks insurance contract

A CAR/EAR contract is not regulated by law or regulations; it is concluded on the basis of internal insurance rules approved by the insurance company itself. The CAR/EAR insurance rules are advisory for the client and binding on the insurance company, so virtually all terms can be negotiated when concluding the contract. Experts recommend paying attention to the following points:

1. Insured events and exclusions, as well as what is not covered by the insurance — and be SURE to compare them with the requirements and nature of the construction work;
2. Insurance terms: sum insured, rates, deductible;
3. Term of the insurance contract and the warranty (maintenance) period;
4. Validity of the contract during a suspension of construction.

Check the other finer points of the contract with an insurance broker or agent.

How much does a construction and erection all risks insurance contract cost

This is the most difficult question that may arise, since there are so many factors affecting the final price of the risk that even now we would not venture to estimate and give an exact price for CAR/EAR insurance, but we will still name some of the factors that shape the insurance premium and rate.

1. The construction company's market position, reputation and track record;
2. The complexity of the construction and installation work;
3. The scope of cover and insurance terms;
4. The amount of liability under the CAR/EAR contract;
5. The insurance company's policy with regard to construction and erection risks.

Conclusion: Construction and erection all risks insurance is one of the most interesting and sought-after types of insurance. Although some clients want to save on it and do not include it in the estimated cost, the Association of Insurance Agents and Brokers nevertheless recommends not cutting corners on what matters.