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Inclusions and Exclusions of Contractor’s All Risk Policy

Posted on 29 August, 2022
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Contractors’ All Risk Policy is a comprehensive cover designed for protection from risks arising at construction sites or during civil engineering projects. Contractors’ All Risk insurance policy is best suited for construction companies, factories, infrastructure projects such as building of dams, bridges, tunnels, etc.

Contractors’ All Risk insurance covers first party losses as well as third party liabilities under certain specific conditions. In Contractors’ All Risk policy, the insured is usually the contractor or the owner of the building. In some cases, as per the terms of agreement between the contractor and the owner, the Contractors’ All Risk policy is jointly in the name of both contractor and owner.

Contractors All Risk Policy Coverage

Often, there are misconceptions that machinery or buildings can be insured only after installation or completion. However, with Contractors’ All Risk policy, the coverage starts right at the time of commencement of the project, and is in effect until the project is handed over to the owner. Thus, Contractors’ All Risk policy also covers test runs, or maintenance checks, as per the specific coverage.

Inclusions in Contractors’ All Risk Policy

Material Damage

The coverage in Contractors’ All Risk policy includes losses from material damage or destruction to property, machinery, building, goods, etc. With Contractors’ All Risk policy, the costs incurred in replacement or repair for the damage is covered, provided the damage was caused due to certain conditions specified in the policy guidelines.

Third Party Liabilities

Within Contractors’ All Risk policy, third party liabilities cover:

  • Damage to property of another person

  • Legal liabilities due to accidental loss of goods or machinery on construction premises

  • Fatal or non-fatal injuries to workers other than the insured party’s own employees

The inclusions in Contractors’ All Risk policy are primarily categorised based on the risk, as follows:

  • Locational Risks – damage or loss due to fire, lightning, or theft on the premises or property

  • Handling Risks – destruction due to the impact of falls, collisions, or mishandling due to faults in machinery such as cranes

  • Testing and Commissioning Risks – any losses due to electricity leakage, short circuits, safety device failures, etc.

  • Human Error Risks – damage or losses arising from negligence, malice, acts of terrorism, riots, etc

  • Disaster-based Risks – losses or damage due to natural disasters such as floods, hurricanes, earthquakes, etc.

Not all damages or losses are covered in the Contractors’ All Risk policy. There are some specific scenarios defined as ‘Perils’ under the policy, and only those losses that are incurred due to the perils are covered. Some of the perils are faults in construction or erection, damage due to carelessness, hazards such as fire, storms, water leakage, etc.

Case Study : Barges Ltd. is a construction company that specialises in building canals and dams. Since inception, they have been responsible for constructing over 30 reservoirs, mini-canals and irrigation facilities across India. The company is in a targeted segment of construction and they do not take up other unrelated construction projects.

Barges Ltd. has specific timelines and budgets for project planning, execution and delivery. Even if one of these parameters go askew for a project, all other projects in the pipeline are affected. Such being the case, they cannot afford delays due to accidents or damages at the construction sites. The company has availed Contractors’ All Risk policy to offset such losses and ensure they can continue their operations on track.

Exclusions in Contractors’ All Risk Policy

Contractors’ All Risk policy does not provide coverage for losses or damage in construction in certain situations, termed as ‘exclusions’ under the policy guidelines, detailed below:

  • War or allied perils

  • Nuclear attacks or allied perils

  • When the amount exceeds the claim, as per the policy

  • Wilful damage or intentional destruction by the Insured or his / her representatives

  • Wear and tear or obsolescence due to ageing of machinery

  • Loss due to defective design in machinery

  • Losses or damages due to stoppage of work

  • Losses observed only at the time of stock taking

  • Penalties or breach in terms of contract

Case Study : Maharaja & Co., a construction company specialises in building housing societies in major Indian cities. During one of their projects, the sub-contractors involved intentionally used defective machinery to cut costs that resulted in damage to the building, and losses to the company. Maharaja & Co. had opted for Contractors’ All Risk insurance, and approached their insurance provider.

However, the insurance provider representative explained that the losses could not be covered since defective machinery had been employed. It was an exclusion in the policy guidelines. Thus, Maharaja & Co. had to bear the losses even though they had Contractors’ All Risk insurance.


Research reports indicate that on an average, 38 fatal accidents occur daily in the construction industry in India. Studies also reveal that the major causes of these mishaps arise from human errors or machine failure. Workers falling from scaffolding or ladders, collisions, open shafts, falling debris, faulty machinery, etc. are the common reasons for construction site incidents.

Contractors’ All Risk policy provides comprehensive coverage from the losses or damages arising in the premises of a construction site right from the time of commencement of the project up to the delivery. Choose an insurance provider who can assess the risk involved based on location, hazards, etc., and suggest the cover best suited for your needs. With ICICI Lombard’s Contractors’ All Risk insurance, get advice and understanding from dedicated risk engineers who specifically cater to the construction industry, to manage your risks better.

  • Contractor’s All Risk Insurance
  • Product Code: 5004
  • Product UIN: IRDAN115RP0021V01200708

Help us know you better!

This contains only an indication of the cover offered. For complete details on risk factors, terms, conditions, coverages and exclusions, please read the sales brochure carefully before concluding a sale.ICICI trade logo displayed above belongs to ICICI Bank and is used by ICICI Lombard GIC Ltd. under license and Lombard logo belongs to ICICI Lombard GIC Ltd. ICICI Lombard General Insurance Company Limited, ICICI Lombard House, 414, Veer Savarkar Marg, Prabhadevi, Mumbai – 400025. . IRDA Reg.No.115. Toll Free 1800 2666. Fax No – 022 61961323. CIN (L67200MH2000PLC129408). (Workman Compensation, 4010 , IRDAN115P0010V01200607)