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Difference between construction all risks and erection all risks insurance explained


Construction sites are susceptible to innumerable risks like theft, legal claims, pilferage etc. As a contractor, it becomes a responsibility to cover such damages or loss by obtaining a construction all risks insurance policy. Similarly, there might be losses to a project involving the erection of a plant and installing machinery and equipment. In this regard, an employer can reduce their financial burden by purchasing a suitable insurance policy like an erection all risk plan.

Although CAR and EAR are considered interchangeable, they have some distinct differences. One can find these details in the following section and make an informed decision.

What is construction all risk insurance?

A CAR, also known as contractors all risks insurance policy, provides well-rounded coverage against damages caused to contract-based workers, equipment and construction plants. It also covers third-party damages caused to a person or property.

As a contractor or employer on a construction site, it is necessary to follow the deadlines. To do so, the smooth operation of construction processes is vital. Any disruption in the workflow can cause substantial losses in terms of finance and also result in legal repercussions. So, it is crucial for architects, engineers and financers to obtain a CAR policy and receive financial protection in the event of an accident.

Additionally, this policy covers damages or loss caused to a property from fire. The benefits under this policy extend to several civil engineering projects like water plants, sewage treatment plants, flyovers, buildings, airports etc.

To conclude, construction all risks insurance provides coverage against both material damage and third-party liabilities.

What is an erection all risks insurance?

An erection all risks insurance policy provides coverage benefits to contractors, subcontractors, suppliers, manufacturers, purchasers or owners. It covers damages or loss caused during machinery or equipment installation in a factory or office. Without this insurance, an employer needs to pay for the losses out of their pockets. So, obtaining this policy becomes important as it offers financial coverage.

Further, it provides comprehensive coverage during storage and testing of a property at an insured site. The insurance plan also provides benefits during instances like fire, flood, storm, short-circuiting, theft etc.

One can include customisable add-ons against additional expenses to extend the insurance cover. Once purchased, policyholders can keep enjoying the benefits until project completion.

Difference between construction all risks and erection all risks insurance plans

CAR and EAR insurance policies have some basic differences that a potential buyer should consider before proceeding to purchase. Understanding the differences will help in fetching maximum benefits and avoiding future complications. Here are some parameters that differ for both the plans:

  • Coverage: A CAR essentially covers construction site projects, workers and contractors. This policy best suitscivil engineering projects like road and building construction. On the contrary, an EAR extends coverage duringthe erection or installation of machinery or equipment. So, it is well-suited for engineering facilities and construction projects involving installations.
  • Add-ons: Policyholders can include add-on covers over and above their basic EAR plan against additional charges. It allows them to obtain overall coverage against damages and loss. Some add-on policies includethe cost of clearance and removal of debris, cross liability, maintenance cover, holiday and overtime charges, However, no such benefits are available if an individual purchases a CAR insurance policy.
  • Third-party liability: A construction all risks insurance policy comes with a third-party liability cover. Thanks to this policy, one can settle third-party claims easily during damages caused to a third-party person or property. However, an EAR originally does not provide third-party coverage. Policyholders need to purchase a separate third-party liability add-on over and above their base plan to enjoy benefits.

So, it is evident that both these policies come with several benefits. In order to obtain maximum benefits, one should consider going through their differences and make an informed decision.