7 Insurance Policies For Every Construction Companies In UAE

The UAE construction sector is growing steadily, with the market expected to reach AED 189.59 billion in 2026 and continue expanding to around AED 242.33 billion by 2030.

This growth reflects rising infrastructure projects, urban development, and investment across residential and commercial sectors. As project size and complexity increase, so do the risks linked to site damage, worker safety, and liability.

For construction companies, insurance is no longer optional. It is a key part of managing financial risk, meeting project requirements, and ensuring long-term business stability in a fast-growing market.

To help you with your research, we have listed the 7 essential insurance policies for construction companies in the UAE.

Is construction insurance mandatory in the UAE?

Yes, construction insurance is effectively mandatory in the UAE, but it stems from various legal and practical requirements rather than a single rule.

• Under the UAE Civil Code, contractors and engineers are legally liable for structural defects for 10 years. This creates a strong need for financial protection.
• UAE labor law requires employers to compensate workers for injuries, which makes workers’ compensation coverage necessary.
• Project approvals, developers, and lenders often require proof of insurance before work begins.

In simple terms, even if not every policy is named directly in law, construction companies cannot operate in the UAE without proper insurance coverage.

Here are the 7 essential insurance policies for construction companies in the UAE

1. Contractors’ All Risks (CAR) insurance covers site damage and is required in most contracts
2. Erection All Risks (EAR) insurance applies to machinery installation projects
3. Third-party liability insurance is mandatory for damage or injury outside the site
4. Workers’ Compensation insurance is legally required for all employees
5. Professional Indemnity insurance protects consultants against design errors
6. Contractors’ Plant and Machinery insurance protects equipment and reduces delays
7. Decennial liability creates a 10-year legal responsibility for structural defects and must be financially covered

1. Contractors’ All Risks (CAR) Insurance

• Recommended: Mandatory in most construction contracts
• Insurance type: Contractors’ All Risks (CAR)

The Contractors’ All Risks (CAR) Insurance policy serves as the financial shield for the construction site itself. If anything goes wrong during execution, this is the first line of protection.

While UAE law does not explicitly name “CAR,” it becomes mandatory under contract practice. Large projects in the UAE follow FIDIC, which clearly requires contractors to insure the works, materials, and third-party risks before work begins.

Legal commentary on UAE construction confirms that CAR is a standard contractual obligation, not optional, especially in government and large private projects.

This policy is taken by the main contractor, but it usually extends to subcontractors and project owners.

In Dubai, contractors must submit an insurance policy covering construction risks and third party liability to obtain permits, as per Executive Council Resolution No. 28 of 2022. 

Coverage includes:

• Physical damage to the building under construction
• Loss of materials stored on site or nearby
• Damage to temporary structures like scaffolding and cabins
• Fire, flood, storm, and accidental collapse
• Errors during construction work
• Third-party injury or property damage
• Costs to clear debris after damage
• Repair and reinstatement expenses

2. Erection All Risks (EAR) Insurance

• Recommended: Mandatory for industrial and mechanical projects
• Insurance type: Erection All Risks (EAR)

Erection All Risks (EAR) Insurance policy becomes relevant when the project shifts from building to installation. It focuses on machinery rather than civil structure.

In the UAE practice, EAR is required for projects such as power plants, factories, and heavy equipment installations. It is treated as the equivalent of CAR for mechanical works.

Although not directly set out in statute, it is recognized within construction insurance frameworks and required under engineering contracts.

Contractors handling installation, EPC companies, and industrial project developers must carry this policy.

Coverage includes:

• Damage while assembling or installing machinery
• Loss during testing and commissioning
• Electrical or mechanical failure during setup
• Faulty installation errors
• Fire or explosion during erection
• Damage during unloading or shifting equipment
• Third-party injury during installation work

3. Third Party Liability Insurance

• Recommended: Mandatory
• Insurance type: Public Liability Insurance

Construction work often affects areas outside the site. A Third Party Liability Insurance policy addresses that external risk.

Under UAE construction frameworks, contractors must protect themselves against claims from people or property not part of the contract. This requirement is consistently included in UAE construction contracts and insurance structures.

It is essential for projects in cities like Dubai or Abu Dhabi, where sites are close to roads, buildings, and public spaces.

Coverage includes:

• Injury to pedestrians or visitors near the site
• Damage to nearby buildings, cars, or utilities
• Accidents caused by falling materials or equipment
• Legal claims filed by third parties
• Court costs, legal fees, and settlements
• Damage due to site operations or negligence

4. Workers Compensation Insurance

• Recommended: Mandatory
• Insurance type: Workers Compensation Insurance

Worker protection is not optional in the UAE. Employers are legally responsible for injuries that happen during work.

Under UAE labor law, companies must compensate employees for workplace injuries and occupational risks. Employers also have a duty to protect workers from hazards and provide safe working conditions.

Because construction work carries a high risk of injury, Workers’ Compensation Insurance is required to meet these legal obligations.

This applies to all contractors employing workers on-site.

Under Federal Decree-Law No. 31/2021, diyah (blood money) can apply if a worker causes death due to negligence. The standard compensation is AED 200,000. This is why contractors use liability insurance to cover such third-party risks. 

Coverage includes:

• Medical treatment and hospital costs
• Compensation for temporary or permanent disability
• Death benefits to the worker’s family
• Salary support during recovery
• Emergency treatment and rehabilitation
• Occupational illness caused by site conditions
• Repatriation of injured or deceased workers

5. Professional Indemnity Insurance

• Recommended: Mandatory for consultants and designers
• Insurance type: Professional Indemnity (PI)

Not all risks come from physical work. Some come from decisions made before construction starts.

A Professional Indemnity Insurance policy protects professionals like architects and engineers when their design or advice leads to financial loss.

In UAE construction practice, this insurance is required through contracts and is part of the standard insurance package for consultants working on projects.

It is critical for firms involved in design, supervision, and technical consultancy.

Coverage includes:

• Design mistakes or incorrect calculations
• Errors in drawings or specifications
• Poor supervision or project advice
• Financial loss caused to the client
• Legal defense and compensation costs
• Breach of professional duty

6. Contractors Plant and Machinery (CPM) Insurance

• Recommended: Recommended
• Insurance type: Contractors Plant and Machinery (CPM)

Construction sites depend heavily on machines. If equipment fails, the entire project can stop.

Contractors Plant and Machinery (CPM) Insurance policy protects expensive machinery used on-site. While not mandated by law, it is widely used in projects in the UAE to reduce operational risk.

It is usually taken by contractors who own or lease equipment.

Coverage includes:

• Damage due to accidents, collisions, or overturning
• Theft or loss of machinery
• Fire and natural disaster damage
• Breakdown of equipment (if included)
• Damage during operation or idle time
• Loss during transport between sites

7. Decennial Liability Insurance

• Recommended: Mandatory by law
• Insurance type: Decennial Liability Insurance (DLI)

Decennial liability insurance protects contractors and engineers against the 10 year liability set under UAE law. Under Article 880 of the UAE Civil Code, both parties remain legally responsible for structural defects or the collapse of a building for ten years after project delivery.

This liability is strict. It applies even if the defect comes from soil issues or design problems. The law also does not allow any contract clause to remove or limit this responsibility.

Decennial liability insurance helps cover the financial risk that comes from this long term obligation. It usually covers:

• Structural defects
• Total or partial collapse
• Major issues that affect building safety

It is important to understand that the law itself does not directly say that you must buy this insurance. However, since the liability is mandatory and high risk, most developers, lenders, and authorities require this insurance before approving construction projects.

In simple terms, the law forces you to carry the risk, and the market forces you to insure it.

Coverage includes:

• Structural collapse of the building
• Major defects affecting safety
• Faults in design, materials, or construction
• Cost of rebuilding or repairing the structure
• Legal claims made within the 10 year liability period

Why choose Seven Insurance Brokers to find the most suitable construction insurance policies in the UAE

Protect your construction projects with insurance plans for businesses that match your actual risks, project scale, and site operations. 

Instead of relying on fixed packages, the right coverage is built by combining key policies like CAR, liability insurance, workers’ compensation, professional indemnity, and equipment cover.

Seven Insurance Brokers takes a structured approach. Our team reviews your project setup in detail and identifies gaps that are often missed, such as liability exposure, design risks, or long-term structural obligations. So, this helps you avoid under insurance and unexpected costs during or after the project.

Balancing cost and coverage in construction insurance can be complex. With access to multiple insurers, Seven Insurance Brokers helps you compare options and secure competitive pricing without compromising on protection.

👉 Speak with our specialists today to get a free, no-obligation quote tailored to your construction needs.