Insurance Requirements in Construction Contracts
aka: “Don’t Just Insure the Site. Insure Your Sanity.”
When most people hear “insurance,” they think:
Fire, theft, maybe a dodgy neighbor with a ladder.
But in construction?
Insurance is the legal armor that protects everyone from the expensive consequences of… well, construction.
And trust me, it’s not just about covering accidents.
It’s about risk allocation, project survival, and making sure someone other than you pays when the cement mixer goes rogue.
Why Insurance Clauses Matter
They’re like the “break glass in case of emergency” boxes.
Except here, the ‘glass’ is your contract clause, and the ‘emergency’ is a ₹10 crore claim because someone misread the welding spec.
The Employer wants to make sure the project is protected.
The Contractor wants to make sure they’re not bankrupt after a crane mishap.
The Subcontractor wants to know their workers are covered.
And everyone wants to be able to point to someone else when the claims start flying.
The Big 4 Construction Insurances – What You Need to Know
1. Contractor’s All Risk (CAR) Insurance
This covers damage to the works, construction plant, equipment, and materials during the construction phase.
Usually taken by: The Contractor
Watch out for: Who’s responsible for deductibles and whether subcontractors are also named as insured parties. If not, expect disputes.
2. Third-Party Liability (TPL) Insurance
This protects against injury or property damage suffered by third parties (think: a visitor walks into a restricted area and gets hurt).
Usually taken by: The Contractor
Watch out for: Ensure the policy includes employees of other contractors on site — courts have debated this too many times already.
3. Workmen’s Compensation Insurance
Covers injury to workers under the local labor or employee compensation laws.
Usually taken by: Contractor and all Subcontractors
Watch out for: Whether the coverage meets local statutory minimums — and whether foreign workers are included.
4. Professional Indemnity Insurance
This one’s for design errors, technical flaws, or professional negligence (especially in EPC or design-build models).
Usually taken by: Design Consultant or EPC Contractor
Watch out for: It’s often ignored in lump-sum contracts — but crucial when the contractor has design responsibility.
Common Insurance Clause Traps
Let’s call out the usual suspects:
1. “To the extent insurable” loophole
Sounds fair. Actually dangerous. What if a key risk isn’t insurable in your jurisdiction?
2. “Insurance does not limit liability” clause
So you pay the premium and still owe more? Thanks, but no thanks (unless you negotiate a cap).
3. Unclear additional insureds
You thought you were covered, but you’re not named in the policy. Good luck explaining that in arbitration.
4. Mismatch of project duration vs policy term
Contract is 36 months. Insurance expires in 24. That 1-year gap could get very expensive.
Pro Tips Before You Sign
• Ask for the actual policy, not just the certificate
The certificate is like a movie poster. The policy is the movie — and the fine print matters.
You need to check:
• Who exactly is covered? (Contractor, subcontractors, consultants?)
• What is the sum insured — and is it per incident or aggregate?
• What kinds of incidents are actually covered — property damage? Third-party injury? Design errors?
• Are there sub-limits or caps for specific items like tools, equipment, or temporary works?
• Any exclusions hiding in the footnotes? (Spoiler: there usually are.)
• Check the claim process and timelines
Late notice = denied coverage. Make sure the contract tells you when and how to notify.
• Insist on copies of renewal documents
Especially on long projects. Expired policies are a silent killer.
• Don’t forget subcontractor insurances
“Back-to-back” isn’t just a fun dance move. It’s your safety net.
Insurance in construction isn’t about predicting disaster — it’s about surviving one.
It’s not glamorous, but neither is litigation because the forklift driver wasn’t covered.