Construction projects involve different types of risks. A project may face the possibility of damage to the works being constructed, while construction activities can also result in accidental injury to third parties or damage to their property.
Because these risks are different, contractors and project owners may encounter different types of insurance requirements.
Two types of coverage that may be relevant to construction projects are Contractor’s All Risk Insurance (CARI) and Commercial General Liability (CGL) Insurance.
Although both can provide protection against risks associated with business and construction activities, CARI and CGL serve different purposes.
Understanding the difference can help contractors and project owners determine what types of insurance may be relevant to their project.
What Is CARI?
Contractor’s All Risk Insurance (CARI) is designed to provide protection against covered physical loss or damage associated with an insured construction project during the construction period.
It is commonly used for projects such as:
- Building construction
- Infrastructure projects
- Civil engineering works
- Commercial developments
- Renovation projects
- Other construction and engineering projects
Depending on the policy, CARI may cover areas such as contract works, construction materials, temporary works, and certain construction equipment.
CARI may also include third-party liability coverage, depending on the policy structure.
For a more detailed explanation, read our Contractor’s All Risk Insurance guide.
What Is CGL?
Commercial General Liability (CGL) Insurance is designed to provide protection against certain third-party liability claims arising from the insured business’s operations.
For businesses involved in construction, third-party risks may include accidental bodily injury or property damage arising from covered business activities.
For example, a construction operation could accidentally cause damage to a neighboring property or result in injury to a third party.
If the incident falls within the policy’s coverage, CGL may respond to the covered liability claim, subject to the policy’s terms, conditions, limits, and exclusions.
CGL is not limited to construction businesses. It can also be relevant to many other businesses that face third-party liability exposures.
CARI vs CGL: What Is the Main Difference?
The simplest way to understand the distinction is to look at what type of risk the insurance is primarily designed to address.
CARI
CARI primarily focuses on covered physical loss or damage to the construction project and insured property.
CGL
CGL primarily focuses on covered third-party liability arising from business operations.
In simple terms:
CARI → Protection for covered construction project damage
CGL → Protection against covered third-party liability
The actual coverage depends on the specific policy wording, limits, conditions, deductibles, and exclusions.
CARI vs CGL: Key Differences
| Feature | CARI | CGL |
|---|---|---|
| Main purpose | Covers certain physical loss or damage to insured construction works | Covers certain third-party liability claims |
| Primary focus | Construction project and insured property | Third-party bodily injury or property damage |
| Common users | Contractors and construction project parties | Businesses across various industries |
| Construction period | Generally applies during the insured construction period | Depends on the policy and business operations |
| Property damage to project | May be covered, subject to policy terms | Generally not the primary purpose of the coverage |
| Third-party liability | May be included | Primary focus of the coverage |
| Coverage limits | Based on the insured project and policy | Based on the liability limits selected |
This table provides a general comparison. The actual coverage provided by any policy depends on its specific terms and conditions.
What Does CARI Cover?
Depending on the policy, CARI may provide protection for covered physical loss or damage involving areas such as:
Contract Works
The construction works being carried out as part of the insured project may be covered against covered physical loss or damage.
Construction Materials
Materials intended for incorporation into the project may be covered, subject to the policy.
Temporary Works
Certain temporary works associated with the construction project may be included.
Construction Equipment
Certain equipment used in connection with the project may be covered depending on the policy arrangement.
The exact property insured and applicable limits should always be confirmed with the insurance provider.
What Does CGL Cover?
CGL primarily addresses certain liability exposures involving third parties.
Depending on the policy, this may include covered claims involving:
Third-Party Bodily Injury
A third party may suffer bodily injury arising from a covered business operation.
Third-Party Property Damage
A business operation may accidentally cause damage to property belonging to another party.
Legal Liability
Where applicable under the policy, CGL may respond to covered legal liability claims arising from insured business operations.
CGL does not mean that every type of liability is covered. Specific exclusions and conditions apply.
Can a Construction Project Need Both CARI and CGL?
Yes, a construction project may require both types of coverage.
This is because they address different risks.
Consider a construction project where an incident damages part of the building under construction and also causes accidental damage to a neighboring property.
The damage to the insured construction works and the third-party liability exposure are different risks.
CARI may address the covered physical damage to the insured construction works, while CGL may address a covered third-party liability claim, depending on the circumstances and policy terms.
Having one type of insurance does not automatically mean that all risks addressed by the other type are covered.
Is CGL Included in CARI?
CARI may include a third-party liability section, depending on the policy.
However, this does not mean that CARI and CGL are automatically interchangeable.
The scope, limits, conditions, and exclusions of the liability coverage under a CARI policy may differ from a standalone CGL policy.
For this reason, contractors should review their project requirements and the actual policy wording rather than assuming that one policy automatically replaces another.
Which One Does a Contractor Need?
There is no single answer for every contractor or project.
The appropriate insurance depends on factors such as:
- Type of construction
- Project size
- Contract value
- Project location
- Construction period
- Scope of work
- Contractual requirements
- Third-party exposures
- Insurance requirements imposed by the project owner or other parties
Some projects may specifically require CARI. Others may require liability coverage such as CGL, while some situations may call for both.
The project contract should therefore be reviewed carefully before arranging insurance.
Why Is Understanding the Difference Important?
Confusing CARI and CGL can result in misunderstandings about what a policy actually protects.
For example, a contractor may assume that having liability coverage automatically protects the physical construction works.
Likewise, having CARI does not necessarily mean that every potential liability exposure is covered.
Understanding the purpose of each policy allows contractors and project owners to identify potential coverage gaps and discuss their requirements with an insurance provider.
What Information Is Needed When Applying for CARI?
If CARI is required for your construction project, preparing the necessary project information can help make the quotation process more efficient.
Commonly requested information may include:
- Project name
- Project location
- Project description
- Contract or project value
- Construction period
- Scope of work
- Bill of Quantities (BOQ)
- Contract or draft contract
- Notice to Proceed (NTP), when available
- Construction plans or specifications, when applicable
Read our CARI requirements in the Philippines guide for more information about commonly requested documents and project details.
CARI vs CGL: Frequently Asked Questions
Is CARI the same as CGL?
No. CARI and CGL have different primary purposes. CARI generally focuses on covered physical loss or damage associated with the construction project, while CGL primarily addresses covered third-party liability arising from business operations.
Does CARI cover third-party liability?
CARI may include third-party liability coverage depending on the policy. The applicable limits, conditions, and exclusions will depend on the policy.
Does CGL cover damage to the building being constructed?
CGL is primarily designed for third-party liability rather than physical damage to the insured construction works. The actual policy wording should be reviewed to determine whether a particular loss is covered.
Can a contractor have both CARI and CGL?
Yes. A contractor may have both when the project or business requires different types of protection.
Which is required for a construction project?
Requirements vary by project. The construction contract, project owner, financing arrangements, and other factors may specify the insurance required.
Does CARI cover every construction risk?
No. Despite the term “All Risk,” CARI does not mean every possible loss is automatically covered. Exclusions, deductibles, limits, conditions, and other policy provisions apply.
Final Thoughts
CARI and CGL can both be relevant to construction businesses, but they address different types of risks.
CARI is primarily focused on covered physical loss or damage associated with the construction project, while CGL primarily addresses covered third-party liability.
For some construction projects, having one may not eliminate the need for the other.
Before arranging coverage, contractors and project owners should review their contractual insurance requirements and provide complete project information to their insurance provider.
If you need help understanding the insurance requirements for a construction project, PowerWealth Insurance Services can assist you in discussing the appropriate coverage for your project.
Contact PowerWealth to discuss your Contractor’s All Risk Insurance or Commercial General Liability requirements.
