Construction all risk insurance is a comprehensive insurance which provides complete protection against all types of construction risks for the residential, commercial and infrastructural purpose. It covers the physical loss or damage caused to the property, plant and machinery; temporary work erected on-site along with the third-party liability. However, there are some less know provisions of construction all risk insurance that provide additional coverage to the insured. Here are the provisions as mentioned below:

1) Provision for debris removal

According to this provision, the construction all risk insurance covers the insured for the cost of removal of debris. The insurers pay for the cost of removing debris from the site after a loss. Coverage is also given for any necessary demolition, dismantling, or shoring up that is required because of the insured damage.

2) Surrounding property coverage

The construction all risk insurance also covers the loss of or damage to property located on or adjacent to the site when added as an extra coverage in the policy. Such a property may be belonging to or held in care custody or control of the Contractor. It is covered only if the loss has occurred directly due insured items during the period of cover.

3) Provision for Air Freight

The insured can get the expenses incurred on air freight, which means the coverage provided by the insurers for the expenditure incurred by the policyholder in transporting goods via air.

4) Third-party liability coverage

The policyholder can go for the extra third-party liability cover and get the insurer to cover the loss or damage caused to the third-party. This covers the legal liability falling on the insured due to bodily injury or property loss suffered by the third party.

5) Provision for cross liability

According to this provision, the third-party liability cover of the policy applies to the insured parties named in the policy document as if a separate policy had been issued to each party.

6) Provision for overtime, night work and express freight

According to this provision, the insured is covered for the extra charge of overtime, night work, work on public holidays, and express freight caused due to any loss or damage to the items covered under the policy.

7) Provision for custom duty

Any amount paid by the insured on a custom duty is covered by the insurer if the insured submits the claim. Mostly the cover for additional custom duty is on first loss basis. The specific limit for additional custom duty must be selected by the Insured at the inception of the policy, and it can be either in percentage or amount.

8) Escalation Clause

The escalation provision takes care of inflationary tendencies, and an additional premium is charged for the same. It is subject to a maximum limit of 50% of the project policy sum insured

Case Study:

HML Constructions was a renowned construction company in Noida, well-known for its vast commercial and residential projects. Since the company was in this risky business, to ensure complete safety, it had purchased a construction all risk insurance policy.

In August 2017, HML Construction bagged a massive contract of constructing a twenty-two-story office building in Noida. The site was near the company’s warehouse. However, a fire started in the warehouse due to short-circuit and damaged all the goods.

Although there was no physical injury caused, a material loss of Rs 5 lakh took place due to the fire. Since HML Constructions had purchased a construction all risk insurance policy, the insurers were contacted for the claim settlement. By paying out extra premium, the company had expanded the coverage for the surrounding property as well.  Since the warehouse was one of the surrounding properties and had suffered losses, the insurer settled the claim successfully.