Picture this. A main contractor is midway through building a cluster of residential blocks. Two months in, a subcontractor's excavation work causes the ground to shift, damaging a neighbouring property's boundary wall. A week later, a worker falls from scaffolding and is seriously injured. The following month, heavy rain floods the excavation pit and damages equipment belonging to another subcontractor.
Three separate incidents. Three separate parties potentially liable. Three separate sets of costs. And one question hanging over the main contractor's head: which of these am I responsible for, and what does my insurance cover?
This is the daily risk reality of a Singapore construction site. Contractor's All Risk (CAR) insurance is the policy designed for exactly this environment. This post explains what it covers, who needs it, what is commonly misunderstood about it, and what Singapore contractors and builders should check before their next project starts.
Singapore's construction pipeline: why this matters now
This is not a quiet period for the industry. The Building and Construction Authority (BCA) estimates 2025's construction demand to range between S$47 billion and S$53 billion, driven by major public sector projects including the Changi Airport Terminal 5 expansion, new HDB Built-To-Order developments, the Cross Island MRT Line Phase 2, and Tuas Port works. The construction industry is projected to grow at an average annual rate of 4.2% between 2026 and 2029.
More projects mean more sites, more workers, more subcontractors, and more opportunities for something to go wrong. Rising fatal injury rates in construction will drive up insurance costs, trigger stricter regulations, and worsen labour shortages, leading to project delays and higher operating expenses, according to industry analysis. The risk environment is getting more complex, not less.
What is Contractor's All Risk insurance?
CAR insurance is a policy specifically designed for construction projects. Unlike most insurance products that protect one type of asset or one type of liability, CAR brings together two very different covers under a single policy.
The first part is called Contract Works cover, and the second part is Third Party Liability cover. The two are almost always arranged together because the risks they address are generated by the same activities on the same site.
Contract Works cover protects the physical project itself: the structure being built, the materials stored on site waiting to be installed, and the temporary works like scaffolding, formwork, and hoardings that make the construction possible. If a fire destroys half-completed work, a storm collapses the scaffolding, a flood damages materials stored on site, or a theft clears out a site office, Contract Works cover responds to the cost of replacing or repairing the work and materials lost.
Think of it this way: your client has paid you to build something. Until you hand it over on completion, the partially built structure is at your risk. If it is damaged or destroyed, you still have to rebuild it and complete the contract. Contract Works cover is what funds that without coming out of your project margin.
Third Party Liability cover addresses a different question: what if your construction activities cause injury or property damage to someone outside the site? A passerby injured by falling debris. A neighbouring shophouse cracked by vibration from piling works. A vehicle damaged by materials that blew off the site in a storm. In each case, a third party has suffered loss because of your construction activities. Third Party Liability cover responds to their claim against you: both the compensation owed and the legal costs of defending the claim.
Who needs CAR insurance in Singapore?
The short answer is: anyone who is building, renovating, or fitting out, and the list is broader than most people initially think.
Main contractors on residential, commercial, industrial, and infrastructure projects. The main contractor typically holds the CAR policy for the whole project, with the employer (the building owner or developer) and all subcontractors named as additional insured parties. This means one policy covers everyone working on the site.
Subcontractors who may not be covered under the main contractor's policy, or who are running projects where they are the principal contractor. A specialist foundation or piling contractor, a mechanical and electrical contractor, or a specialist facade contractor on a smaller project may need their own CAR policy.
Developers and building owners. Where a developer is managing a construction project directly, or where a building owner is commissioning a major renovation or addition and alteration (A&A) works, they may be required to hold CAR insurance as part of the construction contract.
Interior fit-out and renovation contractors. This category is often overlooked. An interior contractor carrying out a shop fit-out, an office renovation, or a F&B outlet refurbishment is doing construction work. The risks, damage to the existing premises, injury to building occupants, damage to a neighbouring unit, are real and the same logic applies.
Engineering and infrastructure contractors. Road contractors, drainage contractors, civil engineering firms, and utilities contractors. Projects involving underground work, large machinery, or works adjacent to existing infrastructure carry elevated third party liability exposure.
What does a CAR policy cover in plain terms?
Here is a section-by-section breakdown of the main cover areas.
Contract Works (Section 1)
Covers loss or damage to the works under construction including: the permanent works being built, temporary works and site facilities, construction plant, equipment, and machinery owned by or in the care of the contractor, and materials and goods on site waiting to be incorporated. Covered causes include fire, flood, storm, collapse, theft, vandalism, accidental damage, and in some policies, defective workmanship causing damage to otherwise sound work.
Note: defective workmanship cover needs to be read carefully. Most policies cover the damage caused by a defect (the wall that collapsed because of a structural error), not the cost of fixing the defective work itself (re-doing the structural element that was wrong). Understanding this distinction before a claim is better than discovering it during one.
Third Party Liability (Section 2)
Covers legal liability to third parties for: bodily injury or death of a third party arising from construction activities, and property damage to third-party property caused by construction activities. The policy covers both the compensation paid to the claimant and the legal costs of contesting or settling the claim.
Important exclusions to be aware of: most CAR policies do not automatically cover liability arising from the use of motor vehicles (that sits under commercial motor insurance), liability for professional design errors (that sits under professional indemnity), and liability arising from pollution unless the policy has a specific pollution extension.
Maintenance period
Most CAR policies extend into a maintenance or defects liability period, which typically runs for 12 months after practical completion. During this period, the contractor is responsible for rectifying defects that emerge. The CAR policy provides limited cover for damage to the completed works during this period while the contractor is still on the hook for defects.
Common gaps and misconceptions Singapore contractors get wrong
"The main contractor's CAR covers me as a subcontractor automatically."
Sometimes yes, sometimes no. Whether a subcontractor is covered under the main contractor's CAR policy depends on the specific policy wording and what the contract between the main contractor and subcontractor says. Do not assume. If you are a subcontractor, confirm in writing whether you are a named insured on the main contractor's policy, and for what scope of activities.
"My plant and equipment is covered under CAR."
Construction plant and equipment, such as cranes, excavators, and concrete pumps, is sometimes covered under Section 1 of a CAR policy and sometimes excluded, depending on whether it is owned or hired. Many contractors arrange a separate Plant and Equipment policy for major items of plant, particularly owned machinery that moves between projects. Check your policy schedule rather than assuming.
"CAR covers the full contract value."
The sum insured for Contract Works needs to be set at the full reinstatement value of the project at completion, including the cost of professional fees for redesign and regulatory approvals if the works need to be rebuilt from scratch. Under-insuring the contract value, often done to reduce premium, creates a proportional reduction in any claim payout. If the contract is S$5 million but the policy is insured for S$3 million, the policy may only pay 60% of a valid claim.
"CAR is only for big projects."
CAR insurance is equally relevant for a S$300,000 shopfront renovation as it is for a S$30 million residential block. The risks, fire, flood, third party injury, property damage, do not scale with project size. A small project in a dense urban environment, such as a renovation in a Tanjong Pagar shophouse row, may have more third party liability exposure than a large standalone project on an open site.
What the BCA and MOM require
For public sector projects and larger private sector developments, CAR insurance is often a mandatory contractual requirement specified by the building owner or developer. The minimum third party liability limit and the scope of cover required will typically be set out in the contract documents.
Under the Workplace Safety and Health Act, the main contractor on a construction site is responsible for the safety of all workers on that worksite, including subcontractors' workers. This does not make WSH Act liability the same as CAR insurance, but it does mean the main contractor's exposure for worksite accidents is significant, and the interaction between CAR cover, Work Injury Compensation (WIC) insurance, and employer's liability needs to be understood as a package rather than in isolation.
You can read more about WIC obligations for construction workers in our post on WICA and WIC Insurance in Singapore.
What information do you need to arrange a CAR policy?
Getting a CAR quote is straightforward if you have the right information ready. Here is what insurers typically ask for.
The contract value or estimated cost of the works, which sets the sum insured for Contract Works. The project description: what is being built, where, and over what period. The project duration: CAR policies run for the length of the project, not on a calendar year. The names of the employer, main contractor, and principal subcontractors to be named on the policy. The third party liability limit required, which is typically specified in the construction contract. Whether the project involves any specialist activities that need specific consideration: underground works, demolition, piling, works adjacent to water, or works in close proximity to existing occupied buildings.
For contractors who run multiple smaller projects throughout the year, an annual or blanket CAR policy can be structured to cover all projects up to a specified contract value, rather than arranging a separate policy for every project. This is more practical and often more cost-effective for active contractors.
You can read more about our CAR cover on the products page. If you are starting a new project and would like to understand what a well-structured CAR policy looks like for your specific project scope and contract requirements, we would be glad to work through it with you.
This article provides general information only. It is not insurance advice. Policy availability, terms, conditions, and exclusions vary by insurer and product, and cover is subject to the full policy wording. Please contact TZY CO for advice on your specific situation.