CAR vs EAR Insurance
CAR is for civil works, EAR for erecting machinery. The real difference is testing and commissioning.
Contractors All Risk (CAR) and Erection All Risk (EAR) are the two project policies of engineering insurance. Both cover a project while it is being built, from the time materials are unloaded at site until the work is handed over, on an all risks basis: everything is covered unless excluded. The difference is what is being built. CAR is for civil works such as a housing tower in Pune, a flyover or a canal. EAR is for installing plant and machinery, such as a turbine at a power station or a paint shop at a car plant.
The practical test: if the value is mostly concrete, steel and labour, it is CAR. If it is mostly machinery that has to be erected and then run up, it is EAR.
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CAR vs EAR Side by Side
Subject
Contractors All Risk (CAR)
Civil engineering works: buildings, roads, bridges, dams, tunnels
Erection All Risk (EAR)
Erection of machinery, plant and steel structures
Testing and commissioning
Contractors All Risk (CAR)
Not the focus; civil works are not 'tested' in the same way
Erection All Risk (EAR)
Covered, including breakdown during installation or testing
Sum insured
Contractors All Risk (CAR)
Completed contract value of the works, including materials and labour
Erection All Risk (EAR)
Full erected value of the plant, including freight, duties and erection costs
Typical big loss
Contractors All Risk (CAR)
Flood or collapse during construction, landslide on a hill road project
Erection All Risk (EAR)
Damage during hot testing, a crane dropping a heavy component
Bought by
Contractors All Risk (CAR)
The principal (owner) or the contractor, in joint names
Erection All Risk (EAR)
The principal or the erection contractor, in joint names
| Point | Contractors All Risk (CAR) | Erection All Risk (EAR) |
|---|---|---|
| Subject | Civil engineering works: buildings, roads, bridges, dams, tunnels | Erection of machinery, plant and steel structures |
| Testing and commissioning | Not the focus; civil works are not 'tested' in the same way | Covered, including breakdown during installation or testing |
| Sum insured | Completed contract value of the works, including materials and labour | Full erected value of the plant, including freight, duties and erection costs |
| Typical big loss | Flood or collapse during construction, landslide on a hill road project | Damage during hot testing, a crane dropping a heavy component |
| Bought by | The principal (owner) or the contractor, in joint names | The principal or the erection contractor, in joint names |
What Both Policies Cover and Exclude
Section I is material damage to the works; Section II, if bought, is third-party liability arising from the project.
- check_circleCovered: fire, lightning, explosion, flood and storm, theft and burglary, riot and malicious damage, and accidents from negligence, lack of skill, collision, impact and dropping.
- check_circleOptional extensions: debris removal, the owner's surrounding property, third-party liability, express freight and overtime wages, construction plant and machinery used on site, and maintenance cover after handover.
- check_circleExcluded: normal wear and tear and gradual deterioration; the cost of rectifying faulty design, defective material or bad workmanship; and consequential loss such as penalty for delay or loss of revenue.
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How IC-11 Tests This
The standard MCQ: EAR differs from CAR mainly because it also covers testing and commissioning of machinery. A second angle asks which policy adds transit from the supplier (marine-cum-erection) or which cover pays lost profits from late start-up (ALOP, triggered by a CAR or EAR claim). The trap is answering "transit" for the EAR question, or treating penalty for delay as covered under Section I.
FAQs
What is the difference between CAR and EAR insurance?expand_more
CAR covers civil construction works, EAR covers erection of machinery and plant. The cover is similar, but EAR also covers the testing and commissioning of the machinery.
Who should buy contractors all risk insurance, the owner or the contractor?expand_more
Either can, and the policy is usually issued in joint names so the principal, the contractor and sub-contractors are all protected. The contract normally says who must arrange it.
Does an EAR policy cover faulty design?expand_more
No. The cost of rectifying faulty design, defective material or poor workmanship is excluded. Sudden damage to other parts of the works caused by such a defect may be covered, depending on the wording.
What is advance loss of profits insurance?expand_more
Cover for the owner's lost gross profit when a project's start of operations is delayed by damage that is admissible under the CAR or EAR policy.
Next steps
- Machinery Breakdownarrow_forward
- Marine Cargoarrow_forward
- Loss of Profitsarrow_forward
- IC-01: Risk, peril and hazardarrow_forward
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