CAR Insurance Malaysia: Complete Contractor's All Risk Guide for CIDB Contractors

This guide applies to you if you are a CIDB-registered contractor (G1 through G7), you have a project on hand or on tender, and you need to understand how Contractor's All Risk insurance actually works before your certificate of cover is issued. If you are already mid-way through a dispute on a subcontractor exclusion, you are three steps too late.

CAR insurance is compulsory for most Malaysian construction projects. It is also one of the most commonly mis-structured covers we audit. This guide walks you through what CAR actually covers, what it doesn't, how premium is priced, what to check in your schedule, and where CIDB contractors lose money at claims.

We cover the buying decision, the schedule read, and the renewal review. If you are a main contractor, sub-contractor, or a director signing off on a tender that includes a CAR requirement, read this end to end.

What CAR Insurance Actually Covers

Contractor's All Risk is a project-specific, package insurance that bundles two core sections: physical damage to the works and third-party liability arising from the works. The two sections are sold together but they answer very different risks.

SectionWhat It CoversTypical Claim TriggerSection I: Material DamagePermanent works, temporary works, plant, materials, tools on siteFire, flood, storm, collapse, theft, vandalism, impactSection II: Third-Party LiabilityBodily injury or property damage to third parties arising from the worksFalling debris, crane impact, adjacent property damage

The Works Covered

"The Works" in CAR language means everything you are contractually obliged to build. Permanent works (the building, road, bridge, structure), temporary works (scaffolding, formwork, hoarding), construction plant (cranes, excavators, mixers), materials in storage, and tools. Section I is a physical property policy for the whole site.

Third-party liability under Section II is separate from your annual CGL. It responds only to incidents arising directly from the project works. For businesses running many concurrent projects, the CAR Section II and a standalone CGL policy serve different purposes and can overlap or leave gaps. Both need to be reviewed together.

What CAR Doesn't Cover (The Exclusions You Must Know)

CAR is called "all risk," but it is not unlimited. The exclusions in a standard CAR policy are where most disputes happen.

See our dedicated CAR exclusions guide for a full breakdown. The critical ones are:

ExclusionWhy It MattersDefective workmanshipCosts to redo bad work are excluded. Damage to OTHER parts of the works caused by the bad work may be covered (subject to wording)Defective designDesign errors are a PI / SPPI matter, not a CAR matter. If you are a design-and-build contractor, you need bothConsequential loss / LADLiquidated damages and project delay costs are excluded unless you buy DSU coverWear and tear / corrosionGradual deterioration is never coveredContract penaltiesAny fine or penalty under the contract is excludedExisting propertyDamage to the employer's existing property during alteration works needs a specific extension

How CAR Premium Is Priced

CAR is not tariffed in Malaysia. Premium is negotiated project by project, insurer by insurer, based on a short list of rating factors.

Rating Factors

Contract value is the starting point, but not the whole picture. A RM10 million piling project does not rate the same as a RM10 million fit-out project, because the risk profile is different.

FactorWhy It Moves RateScope of worksPiling, demolition, deep excavation attract loading; fit-out works rate lowerConstruction periodLonger duration means more exposure; 12-month vs 24-month projects rate very differentlySite conditionsFlood-prone site, sloped site, proximity to water bodies or rail all load the rateContractor experienceClaims history across your CAR programme affects your next quoteMaintenance period length12-month maintenance vs 24-month DLP affects premiumExtensions requestedDSU, escalation, 72-hour clause, cross-liability, waiver of subrogation all have separate loadings

Our CAR insurance cost guide goes deeper into how contractors can benchmark their quotes. The short version: if you are a G5-G7 contractor paying a flat rate against every project without any scope-specific negotiation, you are almost certainly overpaying on low-risk projects and under-protected on high-risk ones.

Reading Your CAR Schedule

Most contractors accept the CAR schedule the insurer issues and file it. This is the biggest avoidable error in the CIDB insurance lifecycle. The schedule is where the cover is defined, and reading it properly takes 20 minutes the first time.

Key Fields to Check

FieldWhat to CheckInsured partiesDoes this include your subcontractors and the employer? Missing names mean missing claims rightsContract value / estimated finalUnder-declared value will trigger average clause at claimPeriod of insuranceDoes it cover your actual construction schedule, including likely extensions?Maintenance periodVisits maintenance or extended maintenance? Matches your DLP obligation?Third party liability limitIs this the contract-required limit or a default low number the underwriter slipped in?Excess structureSeparate excesses per peril (fire, flood, collapse)? Per claim or per event?Extensions / endorsementsDSU, 50/50, 72 hour clause, professional fees, debris removal, cross-liabilitySubjectivities / warrantiesHot work warranty, watchmen warranty, dewatering warranty. Breach voids cover

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The Subcontractor Problem

The single most expensive dispute we see on CAR claims is the subcontractor coverage gap. Main contractor assumes the subcontractor's work is covered under his CAR. Subcontractor assumes the main contractor is handling it. Neither reads the schedule to check whether subcontractors are named insureds.

Result: at claim, the insurer can exercise subrogation rights against a subcontractor who was never named. The subcontractor's own liability cover may not respond. The main contractor may be left holding the cost of subcontractor errors that CAR was supposed to absorb.

The fix is simple: make sure your CAR policy explicitly names all subcontractors working on site, or includes them under a "subcontractors including" clause. Review the wording specifically, do not assume. See our subcontractor insurance guide for more.

Maintenance Period: Visits vs Extended

The DLP (defects liability period) under your construction contract is not automatically covered by CAR. Maintenance period cover is a specific section of CAR that extends past practical completion, and it comes in two flavours.

TypeWhat It CoversWhen To UseVisits MaintenanceDamage caused by the contractor WHILE rectifying defects during DLPMost contracts; default optionExtended MaintenanceVisits maintenance PLUS damage arising from a cause that occurred during the construction period but manifests during DLPComplex projects, M&E, design-and-build; preferred for contractors with PI exposure

Extended Maintenance costs more but gives materially wider protection, especially for complex works where defects may not appear until months after handover.

CAR and CIDB Grade Requirements

CIDB does not mandate a specific CAR sum insured, but project clients (especially JKR, GLCs, and private developers) impose their own requirements. Your CIDB grade affects the project sizes you are eligible for, which in turn affects the CAR sum insured you will typically buy.

CIDB GradeTypical Project ScaleCommon CAR ConsiderationsG1 to G3Smaller projectsProject-specific CAR; annual open cover sometimes cheaper if running multiple small jobsG4 to G5Mid-tier projectsProject-specific CAR is standard; DSU and extended maintenance become more relevantG6 to G7Larger commercial and government projectsProject-specific CAR mandated by employer; contract-specific wording review essential

Contract-specific wording review is where G6-G7 contractors most often lose money, because even experienced quantity surveyors do not always catch insurance-clause mismatches. Background on grades and limits in our CIDB grade requirements guide.

FAQ

Is CAR insurance compulsory for CIDB contractors?

It is effectively compulsory for most projects because contract conditions (PAM, JKR, PWD 203A, etc.) require the contractor to take out project insurance. CIDB itself does not enforce CAR directly, but you will not get to site without it on any meaningful project.

Does my annual CGL replace CAR?

No. CGL is an annual liability policy covering general business operations. CAR Section II covers liability arising from the specific project and Section I covers the works themselves. You need both for most construction businesses.

Who pays the CAR premium, me or the employer?

Depends on the contract. Most standard forms require the contractor to take out CAR with the employer named as co-insured. Some contracts (especially JKR forms) require the employer to take out the policy. Read the insurance clause before you price the tender.

What happens if the project gets extended?

You need to inform the insurer and pay an additional premium for the extended period. If you run past the CAR period without extending, your cover lapses and any loss during the uncovered period is your own. This is a top-5 claim dispute area.

Does CAR cover testing and commissioning?

Usually only the first testing phase, and only if specifically included. Extended commissioning (beyond the initial test) is a common exclusion and may need a separate EAR or commissioning cover extension.

What is DSU and do I need it?

Delay in Start-Up (DSU) covers the financial loss caused by a CAR-insured event delaying project completion. If you or your employer faces liquidated damages or lost revenue from delay, DSU is essential. For revenue-generating assets (power plants, commercial buildings with pre-sold units), DSU is standard practice.

Can a subcontractor rely on the main contractor's CAR?

Only if the subcontractor is specifically named as an insured party. Otherwise the insurer retains subrogation rights against the subcontractor even for incidents where CAR responded.

What is the 72 hour clause?

The 72 hour clause treats all losses from the same atmospheric event (for example, one continuous storm) as a single occurrence, so you pay one excess rather than multiple. Valuable for monsoon-exposed sites. Often not included by default; ask for it.

Can I buy CAR after construction has already started?

Technically yes, but insurers will apply a warranty that losses before inception are not covered, and they will ask detailed questions about why cover is being arranged late. You will get worse terms than if you had arranged cover at mobilisation. Better to arrange CAR at contract signing.

Foundation Conclusion

CAR insurance is not a commodity, and CIDB contractors who treat it as a tick-box item routinely lose money at claims. The difference between a well-structured CAR programme and a poorly structured one is rarely visible until a loss happens, and by then it is too late.

Foundation specialises in construction and engineering risks for Malaysian contractors. If you are pricing a new project, reviewing a CAR schedule, or negotiating a difficult claim, CAR insurance is core to what we do every day.

Talk to our risk specialists about your CAR programme

Disclaimer: This article provides general guidance on Contractor's All Risk insurance coverage available in the Malaysian market as of April 2026. Policy terms, conditions, and availability vary by insurer and project. Always review your specific CAR schedule, contract insurance clauses, and consult a qualified insurance professional before making coverage decisions.