How does a developer benefit from the contractors’ all risks policy? First and foremost, this instrument serves to minimize the damage or delay in completing a construction project due to an accident on the construction site. It is essential that the insurance policy is drafted professionally. Read this article to find out how.

In regard to construction Ukraine’s insurance market is able to offer an effective instrument safeguarding developers’ interests. That is contractors’ all risks (CAR) policy which stipulates the indemnity sufficient to cover the damage due to unforeseen accidents which occurred prior to putting the object under construction into operation. 

The CAR policy is perhaps the most flexible insurance agreement on the market. It is always tailored for each construction site individually which includes both advantages and pitfalls at the same time. Limits of coverage are defined by sections and specific clauses. A regular CAR insurance policy consists of two sections governing certain group of perils. Regarding the structure of the CAR policy, insurance for objects under construction in Ukraine are not exceptions. Insurers adhere to common practices worldwide.

Section 1. Property damage insurance.

This is a basic section included in each and every policy which stipulates for indemnity due to material damage occurred during the construction period. Normally cost of materials, equipment and contract work are covered. Building machinery, temporary conduits, property during transportation and warehousing can be also included into the coverage upon the Insured’s discretion.

Please note that insurance companies usually require that every property item insured under this section be listed in the cost estimate which serves as a compulsory appendix to the insurance policy.

Section 2. Third party liability insurance.

Both property damage and bodily injuries occurred due to a fault of the insured are covered. Employees of the Insured or his contractors are not considered third parties under this section. They can however be included in the coverage through an employer’s liability or casualty insurance policies.

Section 3. Delay in completing a construction project and putting the object into operation.  

This section caters best the commercial property objects under construction. Ukraine’s market, unfortunately, cannot boast a rich number of policies carrying this section, though it is widely used abroad. By adding section 3 to the policy the Insured secures the indemnity for financial losses he may suffer due to a pause in the construction works leading to the delay in putting an object into operation. Under the section in question the Insured is entitled to indemnity equal to his regular gross revenue for the period of the delay.

Interestingly enough, apartment houses cannot be insured under this section as the prices for the apartments do not normally change even if the building is put into operation later than expected meaning that no actual financial loss takes place.

Nuances of CAR policy

The flexibility of CAR insurance is provided by the available choice of sections to be included in the policy. While Section 1 is a must and can serve alone for the whole policy, Sections 2 and 3 can be insured solely upon Insurer’s discretion, but they only go along with Section 1 and are never sold separately. The economy version of the CAR policy for an object under construction in Ukraine is represented solely by the Section 1 policy stipulating indemnity equal to the cost estimate alone; leaving the cost of building machinery, materials, or temporary conduits uninsured. However you can selectively add some of the most expensive items to the coverage.

Adjustment of policy terms

If you are not satisfied with the standard policy terms and conditions you can modify them by adding specific CAR clauses which are unified for CAR policies worldwide and are not subject to amendments. Each of them is identified by the number assigned to it. Some expand on the insurance coverage offered while others limit it due to certain conditions. It’s always advisable to familiarize yourself with all of the clauses so as to choose the ones which suit your project the most. Or you can rely on the professional advice of your insurance partner.