Ask ten contractors whether CAR insurance and contract works insurance are the same thing and you will get at least three different answers. The terms are used interchangeably across the industry by brokers, insurers, and building contractors alike, and in many contexts they do refer to the same core protection. But there is a meaningful difference between them, and misunderstanding it can leave gaps in your cover that only become apparent when you try to make a claim.
This article sets out what each term means, what each type of policy does and does not cover, and how to work out which arrangement suits the work you do.
What the Two Terms Actually Mean
Contract works insurance is a specific section of cover that protects the partially completed structure from a stated start date through to practical completion or handover. It covers physical damage to the works against events such as fire, flood, storm, theft, vandalism, and accidental damage.
Contractors’ all risk insurance, commonly abbreviated to CAR, is a package policy. It always includes a contract works section but typically goes further. A CAR policy can also cover owned plant and equipment, hired-in plant, tools, and in some arrangements, public and employers’ liability as well.
The relationship between the two is this: contract works is always part of a CAR policy, but a CAR policy is not limited to contract works cover alone.
Different insurers use the terms differently. Some call the entire package “contractors’ all risk.” Others use that term to refer only to the works section. The policy name tells you less than you might expect. What matters is which sections are actually activated in your schedule.
What Contract Works Insurance Covers
The works in progress
The contract works section protects the physical structure you are building or altering from the start of the project to handover. Cover is written on an “all risks” basis, which means the policy responds to any cause of loss or damage unless it is specifically excluded. This is broader than a named-perils policy, where you are only covered if the cause of loss appears on a stated list.
Contract works claims most commonly arise from fire, storm damage, flood, theft of materials, and vandalism to work in progress. If part of the completed structure is damaged or destroyed before handover and you are contractually responsible for it, a contract works policy covers the cost of reinstating the work to the state it was in before the loss occurred.
What it does not cover
Contract works insurance has clear limits. It does not cover:
- The existing structure. On extension or refurbishment projects, the contract works section covers the new work only. Damage to the client’s existing building is excluded. The client needs their own property insurance in place.
- Owned plant and equipment. A telehandler, generator, or compressor you own is not covered under a standard contract works section.
- Hired-in plant. If you hire plant and it is damaged, the contract works section will not respond. You need either a specific plant extension or cover arranged separately.
- Tools. Hand tools and power tools require their own section or a standalone policy.
- Liability claims. Injury to a third party or damage to their property falls under your public liability insurance, not contract works.
- Design errors and professional negligence. Financial losses arising from errors in design or professional advice require professional indemnity insurance.
- Defective workmanship. Contract works insurance covers damage caused by an insured event. It does not pay to remedy poor workmanship as the underlying defect.
What a CAR Policy Adds
Plant and equipment
A contractors’ all risk policy can include a plant section covering owned equipment against accidental damage, fire, and theft on site and in transit. This is a significant addition for contractors who own excavators, compressors, generators, or other site machinery.
Hired-in plant is a separate consideration. Some CAR policies include it as standard; others treat it as an optional extension. If you regularly hire plant from third parties, check your policy schedule carefully. The hire company will hold you responsible for returning equipment in the condition you received it, and without cover in place you absorb that cost.
Tools
A tools section covers hand and power tools against loss or theft on site, in transit, and often overnight in a locked van up to a specified limit. For sole traders and smaller contractors, tools represent a significant investment and their loss can stop work immediately. This section is worth including.
Liability cover
Some insurers package public liability, employers’ liability, and contract works together under a contractors’ combined policy. This can be practical for contractors who want a single policy covering all their main exposures.
Liability cover is not included in a standalone contract works policy by default. A contractor who has public liability but no contract works section is not covered for damage to the works. The two covers protect against different things and neither replaces the other.
What Neither Policy Covers
This is where costly assumptions tend to be made.
Professional indemnity is entirely separate from both CAR and contract works insurance. If you provide design services, offer professional advice, or sign off on specifications, you need PI cover in place. Neither a CAR policy nor a contract works section will respond to a claim arising from a design error or negligent recommendation.
Defective workmanship as a standalone issue is excluded from both. If a wall develops a crack because of poor construction, contract works insurance does not pay to rebuild it. The defect itself is not an insured event, though in some circumstances the policy may cover consequential damage to other parts of the works caused by a separate insured peril.
Existing structures are not covered under a standard contract works section. On refurbishment and extension projects this distinction matters. The client’s existing building needs to be insured separately, either under their own property policy or under a specific joint-names arrangement.
Employers’ liability is a legal requirement if you employ anyone, including labour-only subcontractors who rely on you for more than 20% of their income. It is not included in a basic contract works or CAR policy unless specifically added.
Who Is Responsible for Arranging the Cover?
On projects governed by a JCT contract, the responsibility for arranging works insurance is written into the contract. The three main options under the JCT Standard Building Contract, Clauses 5.4A, 5.4B, and 5.4C, allocate that responsibility differently depending on the nature of the project.
Under Clause 5.4A, which applies to new builds, the contractor takes out the policy and names the employer as a joint insured. Under Clauses 5.4B and 5.4C, which apply to work on existing structures, the employer typically arranges cover for the existing structure and either the contractor or employer arranges cover for the new works depending on which clause applies.
Read the contract before the project starts. One of the most avoidable coverage failures in construction is two parties each assuming the other has arranged the works insurance, and neither has. By the time a claim arises, there is no way to fix it retrospectively.
Joint Names and Why It Matters
A joint names policy lists both the contractor and the client as insured parties under the same contract with the insurer. This prevents the insurer from paying a claim to one party and then pursuing the other to recover the money, a process known as subrogation.
On a construction project where contractor and client have a close working relationship, a subrogation claim by one party’s insurer against the other can cause serious commercial damage. If you are a contractor whose client is arranging the works cover, ask for written confirmation that you are named on the policy. If you are a property developer arranging cover for a project, make sure the main contractor is correctly identified as a named insured.
Which Arrangement Is Right for Your Work?
The right structure depends on the type of work you carry out and how your business operates.
Sole traders and smaller contractors running multiple concurrent jobs are generally best served by an annual CAR policy on a floater basis, with tools and plant sections included. This gives continuous cover across all active projects without needing a separate policy for each contract.
Main contractors and larger firms working on substantial individual projects typically need a single-project CAR policy arranged on a joint names basis, with contract values and project periods stated in the schedule. These should be reviewed and updated if values or timescales change during the build.
Contractors working under a client-arranged policy should always verify they are named on that policy, check the level of cover declared, and consider whether it is adequate for their own exposure or whether they need contingent cover in place.
Homeowners and self-build clients should not assume a contractor’s CAR policy covers their existing property or their personal financial interest in the works. A dedicated renovation or self-build insurance policy arranged through a specialist broker provides the right protection.
Getting the Cover Right From the Start
CAR insurance and contract works insurance protect against the same core risk: physical damage to works in progress. The difference is that a CAR policy can also protect your plant, tools, and hired equipment within a single arrangement, making it the more complete option for most contractors in practice.
The terminology will never be fully consistent across the industry. The practical approach is to focus less on what a policy is called and more on which sections are active in the schedule, whether declared values are accurate, and whether both parties on a project are correctly named as insureds.
If you are not certain your current cover is structured correctly for the work you carry out, get in touch with Construction Insure for a no-obligation review. We have been placing construction insurance for over 40 years and can quickly identify whether you have gaps or whether you are paying for cover you do not need.
Frequently Asked Questions
Is contractors’ all risk insurance the same as contract works insurance?
Not exactly. Contract works is a specific section covering physical damage to the works in progress. A CAR policy always includes this section but typically also covers plant, tools, and sometimes liability. The terms are often used interchangeably in practice, but the schedule is what tells you what is actually covered.
Does my public liability insurance cover damage to the works?
No. Public liability covers claims from third parties for injury or damage to their property. It does not cover damage to the structure you are building. A contract works section or CAR policy is needed for that.
Does contract works insurance cover tools and plant?
A standalone contract works section does not cover tools or owned plant. These require separate sections or a CAR policy that specifically includes them. Hired-in plant is also excluded from many standard contract works sections.
My client says they have arranged contract works insurance. Am I still covered?
Only if you are named on the policy. Ask for written confirmation and check the scope and declared value of cover. If there is any doubt, speak to a specialist broker about your own contingent cover.
Does a CAR policy cover professional indemnity?
No. Professional indemnity is a separate policy covering financial losses from errors, omissions, or negligent professional advice. Neither a CAR policy nor a contract works section provides this cover.