A standard CAR policy covers the construction works, not the client's existing building – that can be included only through a separate section of cover (existing property). In refurbishments it is the existing building that is often the largest risk, so this section has to be requested and checked deliberately.

When this answer applies to your situation

  • A refurbishment or conversion where the work is carried out on or inside a functioning building.
  • Roof replacement, facade insulation, internal conversion involving hot works.
  • The client wants the contractor's policy to protect their building as well.

What can change the answer

  • Whether the policy has an existing property section and with what limit – often it is a sub-limit that is lower than the value of the building.
  • Which risks are covered for the existing property: sometimes only damage caused directly by the construction works.
  • Whether the client has their own property policy and how the two policies work together.
  • Compliance with hot works and fire safety requirements – a breach can affect the claims decision or the amount paid.

What to check in the policy or quote

  • Whether there is an existing property section and its limit
  • The scope of risks covered for the existing property
  • The deductible for this section
  • Requirements for hot works, shutting off the water and security
  • The interface between the client's property policy and the CAR policy (which one responds first)

The typical mistake

The client demands "a CAR policy for the contract sum", but nobody checks whether the existing building is included at all. In a fire it turns out that only the new works worth a few hundred thousand are covered, but not the building worth millions.

Example

A situation typical in practice (generalised example, not a specific client)

A typical situation: during facade insulation the scaffolding catches fire and the upper floors of the building are damaged. If existing property is included in the CAR policy with a sufficient limit, the damage to the building can be covered; if the section is missing – the construction policy covers only the insulation works themselves.

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Sources and basis

This answer is based on Kristaps Račko's practice as a broker; it is not individual insurance advice. General regulatory context: Apdrošināšanas un pārapdrošināšanas izplatīšanas likums, the Latvian Insurance and Reinsurance Distribution Law (likumi.lv); supervision of brokers – the Bank of Latvia register.

Author: Kristaps Račko, insurance broker (partner at SIA EURORISK) Published: Last reviewed:

This is not individual insurance advice; actual cover always depends on the chosen insurer's wording and the special conditions of the policy.