Premium Calculation in Construction All Risk Insurance


Construction All Risk (CAR) insurance is a type of policy that provides coverage for property damage and third-party liability during the construction process. Premium Calculation in Contruction All Risk in CAR insurance is a crucial aspect that determines the cost of the policy. In this blog post, we will explore the factors involved in premium calculation for CAR insurance and how they impact the final premium amount.

Factors Affecting Premium Calculation

Risk Assessment

One of the primary factors that determine the premium amount in CAR insurance is the risk associated with the construction project. Insurers assess the risk level based on various factors such as the type of construction, location, project duration, and the contractor’s experience. High-risk projects, such as high-rise buildings or projects in earthquake-prone areas, are likely to have higher premiums due to the increased risk exposure.

Sum Insured

The sum insured is another crucial factor in premium calculation. It represents the maximum amount the insurer will pay in the event of a claim. The higher the sum insured, the higher the premium. Insurers consider factors like the estimated construction cost, project scope, and the value of the property being constructed while determining the sum insured. It is essential for policyholders to accurately estimate the sum insured to avoid being underinsured or overpaying on premiums.

Additional Coverage

CAR insurance policies offer additional coverage options that can be added to the base policy. These additional coverages, such as delay in start-up, professional indemnity, and contractors’ plant and machinery, provide extended protection but also impact the premium amount. The inclusion of additional coverage increases the risk exposure for the insurer and, therefore, leads to a higher premium. Policyholders should carefully evaluate their needs and assess the cost-benefit ratio of adding extra coverage to their CAR insurance policy.


Premium calculation in Construction All Risk insurance is a complex process that takes into account various factors. Risk assessment, sum insured, and additional coverage options are some of the key elements that impact the premium amount. It is crucial for policyholders to understand these factors and work closely with their insurance brokers or agents to ensure they have adequate coverage at a fair premium. By evaluating the risks involved and making informed decisions, policyholders can protect their construction projects effectively.

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