CAR Insurance Cost Malaysia | Contractor's All Risks Premium Guide
CAR insurance premiums in Malaysia range from 0.15% to 0.45% of contract value depending on project type, risk class, and extensions. This guide breaks down what drives your premium and how to reduce it. Meta Title: CAR Insurance Cost Malaysia | Contractor's All Risks Premium Guide Meta Description: How much does CAR insurance cost in Malaysia? Premium rates from 0.15% to 0.45% of contract value. Factors, extensions, deductibles, and cost reduction strategies. Published Date: 2026-02-06
"How much does Contractor's All Risks insurance cost?" is the first question every contractor asks. The honest answer: it depends on your project type, contract value, risk classification, and extensions. But that doesn't mean premiums are unpredictable.
This guide gives you actual premium ranges by project type, explains every factor that moves your rate up or down, and shows you how to structure your CAR policy to get the right coverage without overpaying.
This guide covers:
- CAR premium ranges by project type and contract value
- The 8 factors that determine your premium
- Section I, II, and III pricing breakdown
- How extensions affect your total premium
- Deductible structures and their impact on cost
- Three worked examples with actual premium calculations
- Strategies to reduce your CAR insurance cost
CAR Premium Ranges by Project Type
CAR premiums in Malaysia are expressed as a percentage of the total contract value (Section I sum insured). Rates vary significantly by project type because different construction activities carry different risk profiles.
These ranges reflect standard market rates for straightforward projects with no adverse claims history. Complex projects, high-hazard works, or contractors with poor claims records will see rates above these ranges.
| Project Type | Typical Rate Range (% of Contract Value) | Example: RM50M Project |
|---|---|---|
| Residential buildings (low-rise) | 0.15% to 0.20% | RM75,000 to RM100,000 |
| Commercial buildings (offices, retail) | 0.18% to 0.25% | RM90,000 to RM125,000 |
| High-rise buildings (above 20 storeys) | 0.22% to 0.30% | RM110,000 to RM150,000 |
| Road and highway construction | 0.15% to 0.22% | RM75,000 to RM110,000 |
| Bridge construction | 0.25% to 0.35% | RM125,000 to RM175,000 |
| Dam and hydraulic works | 0.30% to 0.45% | RM150,000 to RM225,000 |
| Underground works (tunnels, MRT) | 0.35% to 0.50% | RM175,000 to RM250,000 |
| Industrial plant construction | 0.20% to 0.30% | RM100,000 to RM150,000 |
| Renovation and alteration works | 0.25% to 0.40% | RM125,000 to RM200,000 |
Renovation works often carry higher rates than new builds. That's counterintuitive but logical: working within or adjacent to existing structures introduces third-party property exposure, limited access, and unknown conditions that increase the risk profile.
What's Included in the CAR Premium
A standard CAR policy has three sections. Each is priced separately, and the total premium is the sum of all three plus any extensions.
| Section | What It Covers | Sum Insured Basis | Typical Rate |
|---|---|---|---|
| Section I: Material Damage | Contract works, materials, construction plant, machinery on site | Full contract value (including materials and labour) | 0.15% to 0.45% of contract value |
| Section II: Third Party Liability | Bodily injury or property damage to third parties arising from construction activities | Limit of indemnity (per occurrence and aggregate) | RM2,000 to RM15,000 (flat premium based on limit) |
| Section III: Surrounding Property | Damage to existing structures adjacent to or within the construction site | Declared value of surrounding property | 0.10% to 0.25% of declared value |
Section I is the core cost driver and typically accounts for 80-90% of the total CAR premium. Sections II and III add relatively modest amounts but are often contractually required, especially for government projects and projects under CIDB-registered contractors.
The 8 Factors That Determine Your CAR Premium
Insurers evaluate these factors during underwriting. Understanding them helps you anticipate your premium and negotiate better terms.
| Factor | How It Affects Premium | Impact Level |
|---|---|---|
| Project type and risk class | Civil works (roads, dams) vs building works vs underground works. Higher hazard = higher rate. | High |
| Contract value (sum insured) | Larger projects may get volume discounts. But very large projects above RM500M may need reinsurance, increasing rates. | High |
| Construction period | Longer projects expose the insurer for more time. Rate is pro-rated for the full construction period. | Moderate |
| Maintenance period | Defects liability period (typically 12-24 months) adds additional premium, usually 5-15% of the construction period rate. | Moderate |
| Location and geology | Flood zones, soft ground, hillside sites, coastal areas increase risk. Peninsular vs East Malaysia may also differ. | Moderate |
| Contractor experience and track record | Established contractors with clean claims history get better rates. New or inexperienced contractors face loadings. | Moderate |
| Claims history | Past claims on similar projects increase premiums. Three or more claims in five years can result in significant loading or coverage restrictions. | High |
| Extensions and add-ons | Each extension (debris removal, 50/50 clause, design defect, DSU) adds to the base premium. | Moderate to High |
Common Extensions and Their Premium Impact
The base CAR policy covers straightforward construction risks. Extensions widen coverage for specific exposures. Each extension has a cost, and for complex projects, extensions can add 20-40% to the base premium.
| Extension | What It Covers | Typical Additional Cost | When You Need It |
|---|---|---|---|
| Debris removal | Cost of clearing debris after a covered loss | Usually included or minimal (1-2% of base) | All projects (standard inclusion) |
| 50/50 clause (design defect) | Covers consequential damage to sound works caused by a design defect, but not the defective item itself | 5-10% of base premium | Design and build projects, complex structural works |
| Extended maintenance coverage | Full coverage during defects liability period (not just visit-to-site) | 5-15% of base premium | Projects where maintenance work involves significant activity |
| Delay in Start-Up (DSU) | Financial losses from delayed project completion due to insured damage | 15-30% of base premium | Revenue-generating projects (toll roads, power plants, commercial buildings) |
| Professional fees | Architect, engineer, surveyor fees for redesign after covered damage | Usually included (up to 3-5% of claim value) | All projects |
| Escalation clause | Automatic sum insured increase for material cost inflation during construction | Pro-rata increase in premium (typically 10-20% buffer) | Long-duration projects (2+ years) |
| Offsite storage | Materials stored at declared locations away from the project site | 2-5% of base premium | Projects with significant pre-fabrication or staging areas |
| Transit coverage | Materials in transit from supplier to site within Malaysia | 2-5% of base premium | Projects with high-value materials sourced from distant suppliers |
DSU is the most expensive extension and often the most debated. For projects where delayed completion has direct financial consequences (lost rental income, contractual penalties, delayed revenue), DSU is worth the premium. For simple construction projects handed over to a buyer, DSU may not be necessary.
Deductible Structures and Cost Impact
Deductibles (excesses) are the portion of each claim you pay out of pocket before the insurer pays. Higher deductibles reduce your premium but increase your exposure on every claim.
CAR policies in Malaysia typically have different deductibles for different types of damage. The deductible structure directly affects your premium.
| Deductible Type | Typical Range | Impact on Premium |
|---|---|---|
| Standard deductible (general damage) | RM10,000 to RM50,000 per occurrence | Higher deductible = 5-15% premium reduction |
| Natural catastrophe deductible (flood, storm) | 1-5% of Section I sum insured (minimum RM100,000) | Higher NatCat deductible = moderate premium reduction |
| Third party liability deductible | RM5,000 to RM25,000 per claim | Minimal premium impact |
| Testing and commissioning deductible | RM25,000 to RM100,000 | Moderate premium impact for M&E-heavy projects |
| Surrounding property deductible | RM10,000 to RM50,000 | Minimal to moderate impact |
The natural catastrophe deductible is the one that catches contractors off guard. On a RM100M project, a 2% NatCat deductible means you absorb the first RM2 million of any flood or storm claim. If your project site is in a flood-prone area, this retention is significant.
Need help structuring your CAR deductibles? Talk to our specialists
Three Worked Premium Examples
These examples show how different project types, values, and extensions produce different total premiums. All figures are illustrative and based on standard market rates.
Example 1: Residential Development (Low-Rise)
A developer builds 200 units of 2-storey terrace houses in Johor. Contract value RM80 million, construction period 30 months, maintenance period 24 months. Standard risk, no unusual site conditions.
| Component | Basis | Estimated Premium |
|---|---|---|
| Section I: Material Damage | RM80M x 0.17% | RM136,000 |
| Section II: Third Party Liability (RM5M limit) | Flat premium | RM5,000 |
| Maintenance period (24 months) | 10% of Section I | RM13,600 |
| Debris removal extension | Included | RM0 |
| Total estimated premium | RM154,600 | |
| Premium as % of contract | 0.19% |
Example 2: Commercial High-Rise (Mixed Development)
A contractor builds a 35-storey mixed development (office tower + retail podium) in KL. Contract value RM250 million, construction period 36 months, maintenance period 18 months. Section III required for adjacent existing shopping mall.
| Component | Basis | Estimated Premium |
|---|---|---|
| Section I: Material Damage | RM250M x 0.25% | RM625,000 |
| Section II: Third Party Liability (RM10M limit) | Flat premium | RM10,000 |
| Section III: Surrounding Property (RM50M) | RM50M x 0.15% | RM75,000 |
| Maintenance period (18 months) | 8% of Section I | RM50,000 |
| 50/50 clause (design defect) | 7% of Section I premium | RM43,750 |
| DSU (RM20M, 12-month indemnity) | 20% of Section I premium | RM125,000 |
| Total estimated premium | RM928,750 | |
| Premium as % of contract | 0.37% |
Notice how extensions (50/50 clause + DSU) added RM168,750 to the premium, pushing the effective rate from 0.25% to 0.37%. Extensions can add 25-50% to the base cost on complex projects.
Example 3: Highway and Bridge Construction
A JV consortium builds a 15km highway with three bridges in Sabah. Contract value RM500 million, construction period 48 months, maintenance period 24 months. Flood-prone terrain, remote location.
| Component | Basis | Estimated Premium |
|---|---|---|
| Section I: Material Damage | RM500M x 0.28% | RM1,400,000 |
| Section II: Third Party Liability (RM10M limit) | Flat premium | RM12,000 |
| Maintenance period (24 months) | 12% of Section I | RM168,000 |
| DSU (RM40M, 12-month indemnity) | 25% of Section I premium | RM350,000 |
| Escalation clause (15% buffer) | Pro-rata on increased SI | RM210,000 |
| NatCat loading (flood-prone) | 15% loading on base rate | RM210,000 |
| Total estimated premium | RM2,350,000 | |
| Premium as % of contract | 0.47% |
Large civil projects with flood exposure and DSU requirements can push the effective premium rate close to 0.50% of contract value. The NatCat loading alone added RM210,000 because of the Sabah flood-prone terrain.
CAR vs EAR: Which Policy Do You Need?
CAR covers civil and building construction. Erection All Risks (EAR) covers the installation, erection, and testing of machinery, equipment, and steel structures. Many projects need both.
| Project Type | Policy Needed | Why |
|---|---|---|
| Residential and commercial buildings | CAR only | Civil and building works only, no significant machinery erection |
| Roads, bridges, earthworks | CAR only | Civil engineering works without machinery installation |
| Factory with production line installation | CAR + EAR | Building construction (CAR) + machinery erection (EAR) |
| Power plant construction | CAR + EAR | Civil works (CAR) + turbine and boiler installation (EAR) |
| Machinery replacement in existing factory | EAR only | No construction works, pure machinery installation |
| Solar farm | EAR (predominant) + CAR | Panel erection (EAR) + foundation and cabling works (CAR) |
EAR premiums are typically higher than CAR because machinery installation involves testing and commissioning risks that don't exist in pure construction. EAR rates typically range from 0.20% to 0.50% of the erection value.
How to Reduce Your CAR Insurance Cost
You can't change your project type or contract value. But you can influence several factors that move your premium down.
| Strategy | How It Reduces Premium | Potential Saving |
|---|---|---|
| Increase standard deductible | Moving from RM10K to RM50K deductible reduces frequency exposure for insurer | 5-15% premium reduction |
| Maintain clean claims history | No-claims discount or favourable underwriting assessment | 5-20% premium reduction |
| Provide detailed risk information | Complete project specs, soil reports, and methodology help insurers assess risk accurately | 5-10% (avoids conservative pricing from uncertainty) |
| Bundle with annual programme | Contractors running multiple projects can negotiate annual programme rates | 10-20% volume discount |
| Only add necessary extensions | Avoid paying for DSU if no revenue depends on completion date | 15-30% if DSU removed |
| Implement site safety measures | Fire protection, security, HIRARC compliance, documented safety programmes | 3-10% depending on insurer |
| Get competitive quotations | Work with a specialist broker who accesses multiple insurers | Variable, but market competition benefits you |
The single biggest lever is your claims history. Contractors with clean records over 3-5 years consistently get the best rates. One large claim can increase your premium by 30-50% for the next 2-3 renewal cycles.
Get competitive CAR quotations from our construction insurance team
Who Pays for CAR Insurance?
This depends on the contract form used. Malaysian construction contracts typically specify who arranges and pays for CAR coverage.
| Contract Form | Who Arranges CAR | Who Pays |
|---|---|---|
| PWD 203A (government) | Contractor | Contractor (included in tender price) |
| PAM 2018 (private) | Contractor (unless otherwise specified) | Contractor (included in contract sum) |
| FIDIC 2017 (international) | Contractor | Contractor (but cost included in contract price) |
| CIDB Standard Form | Contractor | Contractor |
| Owner-arranged (turnkey/EPC) | Project owner / developer | Project owner |
In most Malaysian construction contracts, the contractor arranges and pays for CAR insurance. The cost is built into the tender price. Smart contractors account for the full premium (including extensions and maintenance period) when pricing their bids. Underestimating insurance cost in your tender is a margin risk you can easily avoid by getting indicative quotations before submitting.
Common CAR Premium Mistakes
These mistakes either cost you more than necessary or leave you exposed at claim time.
| Mistake | Consequence | How to Avoid |
|---|---|---|
| Under-declaring contract value | Average clause applies: every claim is proportionally reduced | Declare full contract value including variations and contingencies |
| Ignoring escalation on long projects | Material cost increases make original sum insured inadequate by project end | Add escalation clause (10-20%) for projects over 24 months |
| Forgetting maintenance period coverage | No coverage during defects liability period after handover | Include maintenance period matching your contract terms |
| Skipping Section III for urban projects | Damage to adjacent buildings during piling or excavation is uninsured | Always include Section III for projects adjacent to existing structures |
| Not accounting for subcontractor interests | Subcontractors' work excluded if not named as insured parties | Ensure all contractors and subcontractors are named insureds |
| Choosing cheapest quote without comparing coverage | Lower premium but higher deductibles, more exclusions, less coverage | Compare coverage scope, deductibles, and exclusions, not just premium |
Other Insurance Costs on Construction Projects
CAR is just one of several insurance policies required on a construction project. Understanding the full insurance cost helps you budget accurately.
| Policy | What It Covers | Typical Cost |
|---|---|---|
| CAR | Material damage and third-party liability during construction | 0.15% to 0.45% of contract value |
| Workmen Compensation | Worker injuries and death during employment | 1.0% to 2.5% of annual wages |
| CGL | General liability beyond CAR Section II | RM3,000 to RM20,000 per project |
| SPPI | Professional negligence (design errors) on specific project | 0.3% to 1.5% of professional fee value |
| Contractor's Plant and Machinery | Damage to contractor's own equipment on site | 1.0% to 2.5% of equipment value |
Total insurance cost for a construction project typically ranges from 0.5% to 1.5% of contract value when all required policies are combined. CAR is the single largest component.
FAQ
What percentage of contract value is CAR insurance?
CAR premiums typically range from 0.15% to 0.45% of the full contract value (Section I sum insured). Simple residential projects are at the lower end. Complex civil works, underground construction, and projects with DSU extensions are at the higher end.
Is CAR insurance mandatory in Malaysia?
CAR is not legally mandatory, but it's contractually required under virtually all Malaysian construction contracts including PWD 203A, PAM 2018, FIDIC, and CIDB Standard Form. Government projects and bank-financed developments always require CAR as a condition of the contract.
Does CAR insurance cover natural disasters like floods?
Yes, standard CAR policies cover natural perils including flood, storm, and tempest. But natural catastrophe deductibles are typically much higher than standard deductibles, often 1-5% of the Section I sum insured. On a RM100M project, that means you absorb the first RM1M to RM5M of any flood claim.
Can I get CAR insurance for small projects under RM1 million?
Yes. There's no minimum contract value for CAR insurance. But for very small projects, the minimum premium (typically RM1,500 to RM3,000) may make the effective rate higher than the standard percentage. Some insurers offer simplified CAR products for projects under RM5M.
Does the CAR premium change if the project is delayed?
Yes. CAR policies are issued for a specific construction period. If the project overruns, you need to request an extension of the policy period. The insurer will charge additional premium on a pro-rata basis for the extended duration. Always notify your insurer before the original period expires.
What's the difference between CAR and EAR insurance cost?
EAR premiums are generally higher than CAR because machinery erection involves testing and commissioning risks. EAR rates typically range from 0.20% to 0.50% of the erection value. For projects requiring both policies, the combined premium accounts for both construction and erection components separately.
Does the maintenance period cost extra?
Yes. Maintenance period coverage adds 5-15% of the construction period premium, depending on the maintenance period length (typically 12-24 months) and whether full or visit-to-site coverage is selected. Full maintenance coverage costs more but provides broader protection.
How do I calculate CAR insurance for a tender submission?
Get an indicative quotation from your insurance broker before submitting your tender. Provide the contract value, project type, construction period, maintenance period, and any required extensions. This avoids underpricing insurance in your bid. A specialist broker can typically provide indicative pricing within 24-48 hours.
Does CAR cover my construction equipment (cranes, excavators)?
Standard CAR Section I covers construction plant and equipment on site against the same all risks perils as the contract works. But coverage is limited to the declared value, and some policies apply sub-limits for individual items. For high-value equipment, consider declaring specific items in the schedule.
Can I negotiate the CAR premium?
Yes. Premium is negotiable, especially for contractors with clean claims history, well-documented safety programmes, and multiple ongoing projects. Working through a specialist broker who has relationships with multiple insurers gives you the best negotiating position. Volume discounts of 10-20% are achievable for contractors running three or more projects annually.
Foundation Conclusion
CAR insurance costs between 0.15% and 0.45% of your contract value, depending on project type, extensions, and risk factors. The premium is predictable if you understand what drives it. Accurate sum insured declarations, appropriate deductible levels, and necessary (not excessive) extensions give you the right coverage at the right price.
The biggest premium savings come from maintaining clean claims history, providing detailed project information to underwriters, and working with a broker who specialises in construction insurance and can access competitive market terms.
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