If you run a renovation or construction company, you might have come across two types of liability insurance: Public Liability Insurance, and Contractors All Risk Insurance. Have you wondered what the differences are between Public Liability Insurance vs Contractor All Risk Insurance? You’ve probably encountered contracts that required you to show proof of Public Liability Insurance, and went ahead to purchase that type of coverage. However, did you know that Contractors All Risk Insurance actually includes Public Liability coverage? Furthermore, did you know that Contractors All Risk Insurance is generally a better option for renovation contractors and construction firms? In this guide, we break down a list of specific differences between the two. This will help you better understand which type of insurance is best suited for your needs, and whether you have any potential gaps in your coverage.
Public Liability Insurance vs Contractor All Risk Insurance
|Coverage||Public Liability Insurance||Contractors All Risk (CAR) Insurance|
|Damage to contract works due to major risks like fire, flood, explosions, lightning, water damage, etc.||Not covered||Covered|
|Damage to client’s property caused by your negligence||Areas which are part of contract works are not covered
Areas which are not part of contract works may be covered (depends on your policy)
|Areas which are part of contract works are covered
Areas which are not part of the contract work are covered
|Property damage to third-parties (e.g. neighbouring buildings)||Covered, but there are exclusions for damage caused by vibrations/weakening of support||Covered|
|Injuries to third-parties (e.g. members of the public)||Covered||Covered|
|Damage to contractor’s machinery and equipment at work site||Not covered||Covered|
|Coverage for hot works/welding||Not covered unless specifically included||Covered|
|Coverage for piling, excavation and demolition works||Not covered||Covered|
|Coverage for marine cargo/inland transit for goods shipped||Not covered||Covered|
Difference 1: Only Contractors All Risk insurance covers damage to contract works due to major risks like fire, explosions, lightning, water damage, and more. Public Liability Insurance does not cover such damage.
This is a major difference between Public Liability Insurance vs Contractor All Risk Insurance. Public Liability Insurance does not cover property under care, custody and control. As such, any damage to your client’s property is not covered. For instance, let’s say a major fire erupts at a building you’re performing renovation or construction works on, and the cause of this fire was not your fault. Since the majority of contracts will only pay you in stages (e.g. 20% down payment, 20% upon Phase 1 completion, and so on), you could be left with losses. Contractors All Risk Insurance would cover the cost of the damage, and therefore help you to recoup the cost of any investments you’ve made into the project.
This is a really important point to consider because contract works are exposed to a significant variety of risks with a razor risks from the weather or from machinery for natural disasters or many other kinds of risks and so it is vital that companies protect the work that they are developing adequately.
Difference 2: Coverage for damage to client’s property due to contractor’s mistakes/negligence
This is another one of the major differences between Public Liability Insurance vs Contractor All Risk insurance. Contractors All Risk Insurance protects you against liability if you negligently damage your client’s property due to your own mistakes. For instance, let’s say you are working on a renovation project in a client’s house. While performing your renovation works you accidentally damaged your clients ceiling. Your client files a lawsuit against you, demanding compensation for the damage that you caused. Public Liability Insurance would not protect you in this scenario. Since the property was under your care, custody and control (i.e. you were working on it), you would not be covered for the lawsuit. In this scenario, only Contractors All Risk Insurance would cover you. This is a very important point, because many business owners operate under the mistaken assumption that Public Liability insurance covers them against liability for property damage under all circumstances. This is not true.
If you perform any kind of physical work that involves property belonging to someone else, then it is vital that you carry Contractors All Risk Insurance. Public Liability Insurance alone is insufficient.
Difference 3: Coverage for contractor’s machinery and equipment
Public Liability Insurance only covers your liability to third-parties, and so damage to any equipment and machinery that you use is not covered. Contractors All Risk Insurance, being designed specifically for contracting companies, will cover damage or loss to machinery and equipment that is being used for your contracting work. This is an excellent point of coverage, since contracting machinery and equipment may frequently get damaged while being used for projects.
Contractors All Risk Insurance also includes coverage for testing machinery and equipment. Before you set out on a project, you may need to conduct tests to ensure that all your equipment is functioning properly. A Contractors All Risk policy would cover any damage to your equipment during testing, and also any potential liability from property damage or injuries during such a period. Coverage for testing is time-limited, and the specific duration depends on your policy. For smaller contractors and construction companies, the testing period cover usually lasts for 2 weeks before the commencement of each project. For larger companies that have more equipment (and also more complex machinery to deploy), the testing period cover can be extended by several weeks to allow adequate pre-construction checks to be performed.
Difference 4: Coverage for hot works/welding
Most standard Public Liability Insurance policies usually carry a hot works/welding exclusion. This means that any liability (e.g. from property damage or injuries) stemming from hot works that you perform will not be covered. Now, hot works are a particularly dangerous activity that have a high chance of causing property damage or injuries to third-parties. If you perform any kind of hot works, this can leave you dangerously exposed to liability.
Contractors All Risk Insurance, on the other hand, does cover liability arising from hot works. This would protect you in case you cause property damage or injuries while welding. For instance, if one of your employees was performing arc welding, and the sparks burnt a passerby, you can be sued for causing personal injury. A Contractor’s All Risk policy would be activated in such a scenario to pay for lawyer’s fees to defend you, and also to cover any potential settlement costs you might have to bear.
Difference 5: Coverage for piling and excavations works
Piling and excavation works are particularly dangerous to your client’s property, and to surrounding buildings. Such works have a high chance of causing damage to underground pipes and cables. Piling and excavation may also cause subsidence or the surrounding ground to weaken, which may damage the integrity of nearby structures. If such damage were to occur, the owners of nearby buildings would certainly hold you legally liable for the damage you caused to their structures.
Public Liability Insurance policies typically do not cover piling and excavation works. However, Contractors All Risk Insurance does cover such high-risk work. If you were sued for causing damage to surrounding buildings due to piling and excavation work, Contractors All Risk Insurance would protect you by paying for your defense fees and damages awarded against you.
Difference 6: Coverage for damage to equipment and supplies being shipped to work sites
Contractors All Risk Insurance can be extended to include inland transit and marine cargo coverage. Usually, companies will have to purchase separate insurance policies to specifically cover their equipment, machinery, inventory, and supplies that are being shipped to the work site. For instance, if you are transporting machinery and building supplies from Jurong to Changi for a construction project, you’ll want to have an Inland Transit Insurance policy to cover any potential damage to your machinery and supplies while on the road. (Note: Be aware that a “Property/Industrial All Risks” policy, which covers damage to property/equipment you own, does not cover insured property or equipment when it’s being transported around. It only covers property/equipment kept in the insured premises.). If you’re shipping supplies (e.g. concrete) and equipment (e.g. power tools) into Singapore from overseas, you’ll need to have Marine Cargo Insurance to protect you in case the supplies or equipment get damaged or lost while on their way here.
The great thing about Contractors All Risk Insurance is that if you want to insure equipment and supplies while they’re being transported, you actually don’t need to maintain a separate Inland Transit or Marine Cargo policy. You can simply include Inland Transit and Marine Cargo cover as extensions under your Contractors All Risk policy. Here are some key items that can be insured for loss/damage while being transported, under a Contractors All Risk policy:
- Machinery & Equipment: Excavators, cranes, piling machines, welding tools, power tools, grinders, etc.
- Supplies: Concrete, steel re-bar, H-beams, bricks, wood, steel, stone, etc.
This way, you don’t have to bother with the hassle of multiple policies. Just carry one Contractors All Risk policy, and you’re good to go.
Difference 7: Coverage for architects’, surveyors’ and consulting engineers’ fees
In the event that you cause property damage, you may need to engage architects, surveyors, and consulting engineers. This is particularly true if the damage that you caused to the building was especially severe. For instance, let’s say that an explosion occurs in a building you’re working on, causing a large portion of the structure you were to collapse. You would need to hire architects, surveyors, and engineers to provide their professional opinion on how best to reconstruct the collapsed portion of the building. You’d need to engage an architect to ensure the reconstructed portion is designed the same way as the rest of the building. You would need a surveyor to ensure , and engineers to ensure that your construction work is mechanically sound. Hiring all these professionals doesn’t come cheap, and could easily set you back tens of thousands (for the smallest of projects) to hundreds of thousands (for larger projects).
A Contractors All Risk Insurance policy can be structured to include this coverage as an extension of cover. This way, you won’t be caught off guard by having to fork out expensive professional fees in the event that you need to rectify property damage.
Public Liability Insurance vs Contractor All Risk Insurance: which is best for me?
|Type of business||Policy best suited for your needs|
|Construction company||Contractors All Risk Insurance|
|Renovation company||Contractors All Risk Insurance|
|Wholesaler of construction equipment (you only supply equipment, and do not perform construction work yourself)||Public Liability Insurance|
|Wholesaler of construction materials (you only supply materials, and do not perform construction work yourself)||Public Liability Insurance or Commercial General Liability Insurance|
|Wholesaler of commercial/domestic equipment (you only supply the equipment, and do not perform installation or servicing works yourself)||Public Liability Insurance|
|Commercial/domestic equipment installation||Contractors All Risk Insurance|
|Commercial/domestic equipment servicing and repairs||Contractors All Risk Insurance|
Where can I buy Public Liability Insurance and Contractors All Risk Insurance?
You can buy Public Liability Insurance online here. You can get an online quote within 3 minutes, and can purchase up to $2 million in coverage, which is a high limit. $250,000 Public Liability coverage starts from just $100 a year – highly affordable rates which are specially crafted for SME owners.
You can purchase Contractors All Risk Insurance here. Provide is one of the leading providers of Contractors All Risk Insurance. We’ve survived numerous renovation contractors and construction companies who trust us to protect their business against liability.