Contractors' All Risks (CAR) insurance is an all inclusive insurance cover used in construction contracts. This research evaluated the efficiency of use of this insurance policy for civil engineering projects in Sri Lanka. It identified in addition, the factors affecting the efficiency of use of CAR policy. Data collected through a survey was used to identify the above factors and appraise the level of efficiency. Using secondary data, it was found that, Third Party damages were high as 85%,

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... re 94% of them were house damages. 47% of CAR claims were settled by the insurer. However 73% of that were under settled. That means totally 34% of claims were under settled 53% of claims were rejected by insurers. Poor knowledge & experience on risk management of local contractors, insufficient and erroneous supplementary data were the reasons for this and considerable percentage was rejected due to foreseeable damage. On the other hand insurers also significantly concerned on continuing the business with contractors and accept risks as it is, rather than concentrating on magnitude of the risk.