The seam that leaves a finished asset uninsured
A project's riskiest insurance moment is not during the build. It is the day the build ends. For the months of construction, a Contractors All Risks or Erection All Risks policy carries the asset. For the years of operation that follow, a property or Industrial All Risk programme carries it. The danger lives in the join between the two.
Establishing the correct point of transfer to an operational policy is critical to avoid a gap in cover, and the transition often exposes a significant disconnect between construction and operational policies. The ideal is simple to state: the operational policy attaches at the precise instant the construction policy ends, with no overlap and, more importantly, no gap. The practice is harder, because the two policies are usually placed by different teams, on different wordings, with different definitions of when the project is complete, and they are rarely reconciled against each other line by line.
The consequence of getting it wrong is severe and asymmetric. A small overlap costs a little duplicated premium. A small gap can leave a fully built, high-value asset, a turbine hall, a metro viaduct, a process plant, exposed for the very window when it first carries load, runs product and generates revenue. That is the worst possible moment to be uninsured, and it is entirely avoidable with deliberate sequencing.
Testing and commissioning: where construction cover should reach
The first source of a gap is a misunderstanding of how far the construction policy extends. Many assume cover ends at physical handover, the moment the contractor hands the keys to the owner. It usually should not, and a well-structured EAR policy does not.
EAR policies typically extend to cover the testing, commissioning and trial-run phase of installed machinery. This matters because testing and commissioning is one of the highest-risk phases of the whole project. Machinery is run, often for the first time, under real loads and conditions; this is precisely when latent erection defects, control errors and process upsets surface and cause damage. Cover that stops at physical handover but before testing finishes would leave the asset exposed during its most failure-prone phase.
The correct reading is that construction-side cover should run until commissioning is complete rather than ending at the earlier point of physical handover. Where the operational programme is intended to pick up the live, revenue-generating asset, the transfer point should be aligned to the end of commissioning, not to a handover certificate that predates it.
The maintenance period and the double-gap trap
The second source of trouble is the maintenance period, a feature of construction policies that has no clean equivalent on the operational side and so is easy to mishandle.
Indian CAR and EAR policies commonly include a maintenance period, usually twelve months after handover, covering defects or damage discovered shortly after completion. The logic is sound: many problems caused during construction or erection only reveal themselves once the asset is in use, and the maintenance extension keeps the contractor's policy responding to those during the defect-liability window.
The difficulty is that this maintenance period runs in parallel with the early operational period. The same asset, in its first year of operation, may be covered by an operational property policy for operational perils and by the construction policy's maintenance extension for construction-origin defects. If the two are not reconciled, two distinct failures can occur. Cover can be duplicated, paying twice for overlapping perils, or, worse, a loss can fall into a seam where each insurer argues the other should respond, the construction insurer saying it is an operational loss and the operational insurer saying it is a construction-origin defect.
The maintenance period must therefore be reconciled against the operational policy deliberately, mapping which policy responds to construction-origin defects and which to operational perils during that overlapping first year, so that every plausible loss has one clear responding policy and no loss falls into a double-gap.
Why this is a recognised structural risk, not a paperwork detail
It would be easy to dismiss the handover seam as an administrative loose end. The international engineering-insurance market does not treat it that way.
The construction-to-operational transition is recognised as a distinct technical topic in its own right. The International Association of Engineering Insurers has addressed it directly, for example in IMIA Working Group Paper 115-19, Construction to Operational Insurance, which underscores that the handover seam is a recognised structural coverage risk rather than an incidental administrative step. When the global engineering underwriting community devotes a working-group paper to a single transition, that transition is a known failure point worth managing formally.
The reason it earns that attention is the combination of high value and high ambiguity. At handover the asset is at its maximum insured value, the build is paid for, and revenue is about to start, while the contractual and insurance position is at its most fluid, multiple parties, shifting responsibilities and two policies on different terms. High value plus high ambiguity is exactly the profile of a risk that deserves deliberate management.
For an Indian project owner, the practical takeaway is to treat the handover as a planned insurance event with its own checklist and its own owner, rather than assuming that placing a good construction policy and a good operational policy separately will automatically produce continuous cover between them. Continuity has to be engineered; it does not happen by default.
A handover checklist for continuous cover
Closing the gap is a matter of sequencing and reconciliation, done before completion rather than discovered after a loss. A disciplined handover runs through a clear set of steps.
- Fix the point of transfer explicitly. Define the exact event at which the construction policy ends and the operational policy attaches, and align it to the end of commissioning rather than to physical handover, so the asset is never between policies.
- Confirm the testing-and-commissioning phase is carried. Make sure the EAR or CAR cover extends through testing, commissioning and trial runs, the highest-risk phase, and that it does not lapse at an earlier handover certificate.
- Reconcile the maintenance period with the operational policy. Map which policy responds to construction-origin defects and which to operational perils during the overlapping first year, eliminating both duplication and double-gaps.
- Align the values and limits across the seam. Ensure the operational sum insured reflects the completed asset value at the moment it attaches, so there is no underinsurance the day operations begin.
- Assign an owner to the handover. Give one party responsibility for confirming continuity, rather than leaving it to two separately placed policies to align by accident.
Working through these before the project completes converts the most dangerous insurance moment of the asset's life into a controlled, documented transition.
Doing it well depends on reading exactly how each insurer's CAR, EAR and operational wordings define completion, testing, commissioning and the maintenance period, and where those definitions align or conflict across the seam. Sarvada gives commercial insurance brokers structured, searchable access to insurer policy wordings and the intelligence around them, so a handover is reconciled against the specific terms of both policies rather than a general assumption that they meet. Request Access to engineer continuous cover across the construction-to-operational transition.
