As a contractor, it is your responsibility to ensure the financial protection of the civil engineering work which you are carrying out. Therefore, it is essential to get the financial protection against various losses or damages which you can do with the help of construction all risk insurance policy.

The policy would play an imperative role by covering you against various losses or damages, like a riot, fire, strike, flood, burglary, theft, negligence, mechanical breakdown, etc.; which can arise at the construction site. The policy also covers third-party liability, i.e., the legal liability which falls on the policyholder due to bodily injury or property damage to the third-party.

If we look at the kind of financial protection offered by construction all risk insurance policy, it is essential to ensure it is sufficient enough to give you protection in case of any loss or damage. There is no point in having a construction all risk insurance policy if it is not sufficient enough to give you coverage.

Further, how much cover you should take in construction all risk insurance policy, it depends on the kind of project as well, sum insured and the voluntary excess opted by the policyholder.

While choosing the cover in your construction all risk insurance, make sure it is enough to give you adequate coverage in case of any loss or damage. In case of inadequate cover in construction all risk insurance policy, you would have to bear the part of the loss at the time of claim. If such condition happened, it would defeat the entire purpose of buying a construction all risk insurance policy.

Here it is important to note while having a comprehensive cover in construction all risk insurance policy is necessary, it is essential to stay away from buying more than what is required.

Case: 1

R.S Construction got a major contract of constructing a school in Meerut. Considering the risks which the company could face at the construction site, it decided to buy construction all risk insurance policy as well.

To find out how much cover it should purchase, R.S Construction considered the total cost of its project. Along with it, the company also considered the perils which were more likely to arise at the construction site and interrupted with the work.

Read More: What are the different types of Losses Covered by Cyber Risk Insurance?

By thoroughly analysing the situation, R.S Construction decided to choose the construction all risk insurance policy with a coverage of Rs 25 lakh. The company was confident that the sum insured was enough to secure it at the time of any loss or damage.

Case: 2

After its successful stint in countries like Sri Lanka and Malaysia, LK Builders set up its office in Gurgaon, Haryana, India. The first contract which the company got in India was constructing a hospital in Bihar. Taking the lessons from the record of heavy rainfall and flood in the state, LK Builders decided to purchase a construction all risk insurance policy.

The company wanted a complete financial shield against losses or damages, and therefore, it decided to go with a comprehensive cover. To find the correct sum insured, LK Builders took the project cost into account along with the type and place of the project.

As it was a project in Bihar, where during monsoon there were higher chances that the state would receive heavy rainfall, the company considered this fact as well and asked for the high sum insured from the insurance company.

Read More: What is covered under Engineering All Risk Insurance?

Along with this, LK Builders also opted for the voluntary excess. It means, at the time of the loss, LK Builders would have to pay a certain portion of the claim and the remaining would be borne by the insurer. At the time of deciding the cover for construction all risk insurance policy, LK Builders also considered the voluntary excess.

Only after carefully analysing factors, like the type of the project, perils involved, cost of the project, voluntary excess, etc.; LK Builders opted for the right cover in construction all risk insurance policy.