Building a Factory in Rawang or Serendah: Contractor's All Risk, Build-to-Suit and When Fire Insurance Starts

Key Takeaways

• Contractor's all risk (CAR) insures the works while they are being built: the structure, materials on site and temporary works, against fire, flood, theft, collapse and accidental damage. Most CAR policies also have a third-party liability section.
• The building contract decides who buys it. Malaysian standard forms commonly make the contractor insure the works in the joint names of owner and contractor. Ask for the policy schedule before work starts, not after something goes wrong.
• Watch the handover gap. CAR normally ends at practical completion or handover. The owner's fire insurance must start that day, even if machines arrive weeks later.
• In a build-to-suit deal, the developer insures the building until handover; the tenant insures its fit-out, machinery and stock, and any works it does during early access.
• Machinery installation is a separate risk. Erection all risks cover, or the supplier's own insurance, should cover machines from delivery to commissioning.

Most of my enquiries for industrial land in Rawang and Serendah come from owners who plan to build. The land checks come first, and I cover those in the Serendah and Batang Kali land title guide. Insurance during construction is the question owners ask least and regret most. This guide is general information, not insurance or legal advice; your building contract and policy wordings decide.

What does contractor's all risk insurance cover?

A CAR policy usually has two parts:

Section	What it covers	Typical gaps
Material damage	The contract works, materials on site, temporary works, against fire, flood, storm, theft, collapse and accidental damage	Faulty design or workmanship itself, wear and tear, the contractor's own plant unless added
Third-party liability	Injury to people who are not workers on the job, and damage to neighbours' property	Injury to the contractor's own workers, which falls under PERKESO and the contractor's own employer cover

For factory sites in north Selangor, two risks come up often. Earthworks on sloping or cleared land can wash out in heavy rain and damage drains or the road, and piling or excavation can crack a neighbour's wall. Both are exactly what CAR is for, so check the flood and third-party limits match the site.

Who should buy CAR, the owner or the contractor?

The contract decides. In practice:

1. Contractor buys, joint names. The most common arrangement. The contractor arranges CAR for the full contract sum, in the joint names of owner and contractor. You check the schedule, the sum insured, the period and that your name is on it.
2. Owner buys. Some owners prefer to control the policy, especially on a large project with several contractors. The contract must then say so, and the contractors' prices should not include insurance.
3. Bank interest. If a bank is financing the construction, it may want its interest noted on the policy. Ask the bank before the policy is issued.

Ask for: the policy schedule, the sum insured (at least the contract sum plus materials supplied by you), the period including any maintenance cover, the excess per claim, and the third-party limit. The contractor's all risk and public liability note from Lulu Loke explains the two covers in plain terms.

Who is responsible if someone is hurt on site?

Workers on the job are the contractor's responsibility as employer: local and foreign workers are covered by PERKESO, and contractors may carry their own employer cover as well; see Lulu's note on workmen's compensation. A visitor, a neighbour or a passer-by who is hurt, or a neighbour's property that is damaged, falls under the third-party section of CAR, or the contractor's public liability policy. As owner, do not let your own staff or customers walk the site without the contractor's permission and safety induction.

When does the owner's fire insurance start?

This is the gap that catches owners. CAR usually ends at practical completion or handover, whichever the contract and policy say. From that moment the building is yours to insure, even if:

• the CCC has not been issued yet,
• TNB has not energised the substation,
• your machines are still being shipped.

Arrange the building fire policy to start on the handover date, at rebuilding cost, with flood added if the site needs it. If the defects liability period runs on after handover, the contractor's maintenance cover only protects the contractor's repair works, not the building against fire. FactoryHub's factory fire insurance guide explains how to set the sum insured and why the bank's policy may not be enough.

Machinery delivery and installation

Production lines, cranes and compressors are at risk from the day they are unloaded. Ask the supplier when ownership and risk pass to you. If it is on delivery, you need cover for the installation period: erection all risks (EAR) for large installations, or the machines added to your fire policy once the building cover starts. Crane beams and runways that are part of the building works should be in CAR until handover.

Build-to-suit: who insures what?

In a build-to-suit arrangement the developer builds to your specification on its land and you lease, sometimes with an option to buy.

Stage	Building	Your fit-out and machinery
Construction	Developer (its CAR)	Not yet on site
Early access for fit-out	Developer, usually still CAR	You, plus CAR for your own fit-out contractor
After handover, during the lease	Usually the landlord, sometimes recharged to you, or you on a full repairing lease	You
After you exercise an option to buy	You, from completion of the purchase	You

Write the handover date, the insurance obligations and what happens if the building is damaged before handover into the agreement for lease. If delivery is late because of damage during construction, the agreement should say whether your rent-free period or completion date moves.

A checklist before the first piling rig arrives

1. CAR policy schedule in joint names, sum insured at least the contract sum.
2. Third-party limit that suits the neighbours: existing factories, a main road, a river reserve.
3. Flood and storm included, with the excess in writing.
4. Bank interest noted if the project is financed.
5. Building fire insurance arranged to start on the handover date.
6. Machinery cover from delivery.

When I show owners factories for sale in north Selangor next to land, I set the cost and time of building, including these covers, against buying a finished unit. FactoryHub's build-to-suit or ready factory comparison is useful for that decision.

If you are weighing land in Rawang or Serendah against a ready factory, WhatsApp Jason Low on +60 12-288 1834. For a CAR or fire insurance quote, you can ask Lulu Loke or your own insurer.