Contract Works Insurance: Who's Covered If It Gets Damaged?

‍‌‌‌‌‌​​​​‌‌‌‌‌‌‌​‌‌‌‌‌‌​​​​​​​‌​‍SiteKiln gives you plain-English information, not personal insurance, financial or legal advice. If you need advice specific to your situation, talk to a qualified insurance broker or solicitor.

6.5.1 The short version

Contract works (often called "contractors' all risks" or CAR) is the cover that pays to rebuild the job itself if the works in progress are damaged or destroyed -- fire, flood, theft, vandalism, that sort of thing. It normally covers the materials and labour already on or in the job, plus materials on site and in transit, up to the contract value.

On JCT and NEC jobs, the contract will usually say who must arrange this cover, for whose benefit, and for what value. If you get that wrong, you can end up paying to rebuild work you thought was insured.

6.5.2 Why it matters

Picture this: you are halfway through a £150k extension, and a fire or flood wipes out the work and stored materials overnight. Contract works is what pays to put the job back to where it was the day before the loss, so you are not rebuilding for free. Without it, you either:

• Walk away and fight with the client, or
• Eat the cost and hope the business survives.

On larger JCT/NEC jobs, contract works/CAR is also part of how risk is shared. Done properly and written in joint names, it stops endless blame games between employer, main contractor and subcontractors -- the policy just pays to fix the damage and the job carries on.

6.5.3 What contract works / CAR actually covers

Contract works / CAR is aimed at the works in progress, not the existing building.

Typical cover includes:

• The permanent and temporary works you are building -- up to the contract sum.
• Materials and components for the job, on site and in transit.
• Temporary buildings, site huts and sometimes scaffolding.
• Owned and hired-in plant used on the contract (depending on policy).
• Professional fees needed to reinstate the works.

Typical insured events:

• Fire (including arson), explosion and storm.
• Flood and escape of water.
• Theft of materials and damage by thieves.
• Accidental damage (for example a machine reversing into newly built work).

What it normally does not cover:

• Damage to existing structures (that needs a different section/arrangement).
• Defective design or workmanship itself -- insurers will usually pay to fix the resulting damage, not to put right the original defect.
• Penalties for delay, loss of contract, or liquidated damages.

6.5.4 Contract works vs "all risks" bundles

The language is messy in the market, so it helps to split it:

• Contract works -- strictly, the cover for the works in progress and related materials.
• Contractors' all risks (CAR) -- often a package that includes contract works, plus sections for plant, tools and sometimes liability covers.

Key points:

• A "contractors' all risks" policy may include: contract works, owned and hired-in plant, employees' tools and occasionally PL/EL.
• A standalone "contract works" section might sit inside a wider contractors' or commercial combined policy.
• Do not assume "all risks" means "literally everything" -- it means "all physical risks to the insured property unless excluded". You still need to read the exclusions and make sure existing structures, plant and liabilities are dealt with elsewhere where required.

6.5.5 JCT insurance -- who insures what

JCT contracts set out who insures the works and, sometimes, existing structures. In broad terms:

• New build -- usually the contractor insures the works (a contract works/CAR policy) in joint names of employer and contractor.
• Work on existing structures -- there are options where the employer insures the existing building and the contractor insures the works, or the employer insures both under a joint names policy.

The detail varies by JCT form and the "Insurance Options" chosen (for example A, B, C in some forms). The important practical bits:

• Check who the contract says must arrange the policy.
• Check if it must be in joint names and for what value (contract sum, plus professional fees, plus debris removal, etc.).
• Make sure the policy is actually scaled to the real project value, not some old default figure.

If you sign a JCT with an insurance option that assumes you carry the works cover and you do not, you are effectively self-insuring that risk.

6.5.6 NEC insurance -- joint names and limits

NEC contracts also expect a project-specific works policy (usually referred to as CAR/contract works) set out in the Insurance Table.

Typical features:

• Cover for "loss of or damage to the works, Plant and Materials" while they are the contractor's risk, usually in joint names of the client and contractor.
• Separate arrangements for existing structures and the client's property.
• Requirements for minimum limits, territorial limits and, sometimes, specific exclusions or endorsements to be avoided.

Again, the contract tells you:

• Who arranges the policy.
• What has to be insured (works only, or works plus existing structures).
• Any special conditions (for example, cover maintained until takeover, maintenance periods, etc.).

Get that wrong and you can find a gap between what the contract expects and what your insurer is actually covering.

6.5.7 Common exclusions and traps

Things that bite contractors on contract works/CAR policies:

• Existing property -- many policies exclude damage to parts of the existing structure not specifically insured. If you are altering or extending, check who is insuring the existing building.
• Completion -- cover usually stops at practical completion or handover; post-completion defects or damage need other arrangements.
• Defects exclusions -- wordings that limit or exclude cover for defective design or workmanship beyond the resulting damage.
• Sub-limits -- for example, low limits on free-issue materials, temporary buildings, or plant, compared with what is actually on site.
• Territorial and height/depth limits -- some policies restrict where and how deep/high you can work without telling the insurer.

On bigger projects, you also need to check:

• That all parties who need to be "joint insureds" (client, main, key subs) are actually named.
• That any major exclusions (for example flood in high-risk zones) line up with the actual site risk and contract obligations.

6.5.8 Quick contract works / CAR health check

You are in better shape on contract works / CAR if you can answer "yes" to most of these:

For every job over a certain size, you know whether the works are insured under your own contract works/CAR policy or under a project policy in the client's name.

Your sum insured (contract value) is realistic, including variations, fees and debris removal -- not just the original tender number.

You have checked the JCT/NEC insurance section and your policy actually matches what it says (who insures, joint names, limits, maintenance period).

You know who is insuring the existing structure on alteration/refurb jobs and it is written down.

You understand the major exclusions (defects, completion, flood/ground conditions) and they do not quietly leave your main risks uninsured.

Any "no" there is a conversation with your broker before you sign the next contract.

6.5.9 What to do next

• On every job over a certain size, confirm in writing who is insuring the works and for what value.
• Check your JCT or NEC insurance section and make sure your actual policy matches what it requires -- joint names, limits, maintenance period.
• Make sure your sum insured is realistic, including variations, professional fees and debris removal, not just the original tender figure.
• On alteration and refurb jobs, confirm who is insuring the existing structure and get that in writing.

6.5.10 Who to contact

• Your insurance broker -- to review contract works cover, limits and joint names requirements (paid)
• FCA Financial Services Register -- fca.org.uk/firms/financial-services-register -- to check your insurer or broker is authorised (free)
• Financial Ombudsman Service -- 0800 023 4567, financial-ombudsman.org.uk -- if you have a complaint about your insurer (free)
• ABI (Association of British Insurers) -- abi.org.uk -- general insurance guidance (free)
• Citizens Advice -- citizensadvice.org.uk -- for general guidance on your rights (free)

6.5.11 Sources and legislation

• Employers' Liability (Compulsory Insurance) Act 1969 -- context for how contract works sits alongside EL. legislation.gov.uk/ukpga/1969/57
• Consumer Insurance (Disclosure and Representations) Act 2012 -- disclosure duties when arranging insurance. legislation.gov.uk/ukpga/2012/6
• Third Parties (Rights against Insurers) Act 2010 -- third-party rights against insurers in insolvency. legislation.gov.uk/ukpga/2010/10

6.5.12 Related guides on this site

• 6.1 Public liability insurance
• 6.4 Tools and plant insurance
• 6.10 Insurance for subcontractors
• 6.9 Making an insurance claim
• 6.3 Professional indemnity insurance
• 3.1 JCT contracts explained

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