Short answer: Contractor's All Risk (CAR) insurance covers physical loss or damage to a project under construction — the works, materials, and site plant/equipment — plus (usually as an extension) third-party injury or property damage claims arising from the works. It is not the same thing as a performance bond, a bid bond, or a warranty security — those are financial guarantees of the contractor's obligations, not insurance against physical loss. Larger and government-funded projects in the Philippines typically require several of these instruments at once, each covering a different risk.
CAR insurance pays out if the building itself gets damaged. A performance bond pays out if the contractor fails to finish the job. They protect against two completely different failure modes, and a serious construction contract will usually specify both.
A standard Contractor's All Risk policy is built around two coverage sections, both running for the duration of the construction period:
Section 1 — Material Damage
Physical loss or damage to the contract works themselves — the structure under construction, permanent and temporary materials on site — plus construction plant, machinery, and equipment (scaffolding, mixers, generators, site offices, storage facilities). Covered perils typically include fire, storm, flood, earthquake, theft, and accidental damage during construction, subject to the policy's specific exclusions.
Section 2 — Third-Party Liability
Legal liability for accidental bodily injury to third parties or damage to third-party property arising in connection with the construction works — a common extension, though the exact scope depends on the policy. Relevant if, for example, falling debris or a site accident affects a neighboring property or a passerby.
Coverage is often further extended to include the testing and commissioning period, delay-in-startup losses if a covered event pushes back completion, and sometimes maintenance-period defects. Typhoons, floods, and earthquake exposure are common riders to specify explicitly given the Philippines' hazard profile — don't assume a standard policy automatically includes them at full limits without checking.
Philippine construction contracts, especially government ones, commonly reference several of these in the same set of bidding documents. They are not interchangeable:
| Instrument | Protects Against | Typically Required By |
|---|---|---|
| Bid Bond / Bid Security | Bidder withdrawing or failing to sign the contract after winning | Project owner, at bidding stage |
| Performance Bond | Contractor failing to complete the works as contracted | Project owner, before contract signing |
| CAR Insurance | Physical loss/damage to the works and third-party claims during construction | Project owner, lender, or the contract itself |
| Warranty Security | Defects appearing during the post-completion warranty/defects-liability period | Project owner, after completion |
Under the IRR of RA 12009 (Sec. 68.4), the winning bidder must post a performance security before the contract is signed, in an amount that depends on its form: 5% (goods and consulting) or 10% (infrastructure) of the total contract price if posted as cash, a cashier's or manager's check, a bank draft or guarantee, or an irrevocable letter of credit; or 30% if posted as a surety bond callable on demand from a surety certified by the Insurance Commission. The 30% figure therefore applies to the surety-bond route, not to every form of security. These percentages are specific to government procurement — private contracts set their own bonding requirements, which are often lower and negotiated case by case.
For government construction procurement more broadly — including how bidders qualify, how contracts are awarded, and what changed under the newer procurement law — see AEDO's guide to RA 12009, the New Government Procurement Act.
Unlike the fixed percentages in the government bonding rules, CAR insurance premiums are individually underwritten — there is no single published national rate. Insurers price each policy based on:
Because of this, treat any CAR premium figure you see quoted elsewhere as a starting reference only — get a firm quote from an accredited Philippine insurer (Etiqa, AXA, Chubb, AIG, and Stronghold all write CAR policies locally) based on your actual project scope, sum insured, and location before budgeting it into a project cost.
The performance-security percentages are from Section 68.4 of the Implementing Rules and Regulations of RA 12009, as published by the GPPB. CAR insurance premium rates are individually underwritten and not published as a fixed schedule — confirm current terms and pricing directly with an Insurance Commission-accredited insurer for your specific project.
What does CAR insurance cover?
Physical loss or damage to the works, materials, and site plant/equipment during construction, plus (usually as an extension) third-party liability for injury or property damage arising from the works.
Is CAR insurance the same as a performance bond?
No — CAR insures against physical damage, a performance bond guarantees the contractor completes the job. Contracts often require both.
How much is a performance bond on a government contract?
It depends on the form: not less than 5% (goods, consulting) or 10% (infrastructure) of the total contract price for cash, a manager's or cashier's check, a bank draft or guarantee, or a letter of credit, and not less than 30% for a callable-on-demand surety bond, per Section 68.4 of the RA 12009 IRR.
Do private construction contracts require CAR insurance?
Not by a single blanket national law, but it's commonly required by the owner, lender, or the construction contract itself, especially for commercial and higher-value builds. Check your specific contract.
Statutes, codes, official tools and references used or referred to in this article, linked to their source. Links open in a new tab.
Prices, cost bands and rate figures in this article are AEDO Construction's own market and practice figures for Philippine work unless a source is named beside them. Code and statute references above link to the primary text.
AEDO's design-build service includes coordinating the insurance and bonding requirements your project contract calls for — under one contract, for projects located in Negros Oriental. For projects elsewhere in the Philippines, AEDO provides complete structural design with remote engineering oversight, and can refer you to a vetted local contractor for construction and site-level contract administration.
