Why Should Contractors Require CAR/EAR Insurance in Every Project Contract?

Projects Rise, Risks Also Rise

The Indonesian government is currently accelerating the development of infrastructure and public housing throughout the region.

From subsidized housing projects, public facility construction, to school building and house of worship renovations — thousands of local contractors are actively involved in these projects.

However, behind the enthusiasm for development, many contractors still forget one important element: project insurance protection.

Some believe project insurance is merely a formality. Others believe the cost isn’t worth it, or feel their projects are small enough not to warrant coverage.

In fact, the risk of damage, accidents or loss does not recognize the size of the project.

One small incident can wipe out a contractor’s entire profits and even working capital.

Therefore, every professional contractor should make CAR (Contractor’s All Risks) or EAR (Erection All Risks) insurance a mandatory requirement in every project contract.

And to ensure everything runs smoothly and efficiently, use a professional insurance broker such as PT Liberty and General Insurance Broker (L&G Insurance Broker).

The Role of Insurance Brokers and Why Contractors Need Them

Before discussing project risks further, it is important to understand the difference between insurance agents and brokers.

• Insurance agents work for specific insurance companies.
• Insurance brokers work for their clients (you) and are free to choose the best insurance company that suits your needs.

In other words, a broker is an independent advisor who sides with the contractor, not the insurance company.

Broker duties include:

• Analyze the type of project and the risks that may occur.
• Prepare proposals and recommend the appropriate policy type (CAR or EAR).
• Negotiate the best premiums to various insurance companies.
• Accompanying you in the claims process, from reporting to compensation payment.

As an official broker licensed by the OJK, L&G Insurance Broker has more than two decades of experience assisting contractors, developers, and EPC companies throughout Indonesia.

From residential projects to energy projects worth hundreds of billions of rupiah — L&G understands every aspect of risk and the assurance required.

Why Insurance Should Be Part of a Project Contract

In the professional construction world, insurance is no longer optional, but an integral part of the work contract.

Some of the main reasons:

• Protecting against the Risk of Major Losses
  Workplace accidents, fires, material theft, or extreme weather can cause significant losses that could bring a project to a complete halt.
• Employer Requirements
  Many large government, state-owned enterprise and private projectsrequires an active CAR/EAR policybefore work mobilization begins.
• Demonstrating Contractor Professionalism and Credibility
  Contractors who have insurance policies show that they are serious, responsible, and have good risk management.
• Legal and Financial Protection
  If a loss occurs that results in a claim from a third party, insurance will protect the contractor from legal risks and compensation costs.

In other words, without insurance, the contractor is risking his entire reputation and finances on a single project.

Real Risks That Lurk for Contractors

Construction is one of the highest-risk business sectors. Here are some examples of risks that can occur at any time:

• Damage Due to Work Errors
  Errors in casting, installation of steel structures, or foundation calculations can lead to cracks, collapse, or major damage.
• Fire and Explosion
  The use of welding equipment, chemicals, or unstable electrical installations can trigger fires at project sites.
• Theft of Materials and Equipment
  Materials such as iron, cement, and cables are frequently stolen in open project areas.
• Workplace Accidents and Legal Liability
  Workers falling, being struck by falling materials, or causing injury to others can result in lawsuits and large compensation.
• Natural Disaster (Act of God)
  Floods, earthquakes, or landslides could completely destroy a project.
  This coverage can be added as an extension to a CAR/EAR policy.

All these risks can be covered if the contractor has the right CAR or EAR insurance policy.

What is CAR and EAR Insurance?

1. Contractor’s All Risks (CAR)

This insurance covers physical damage to civil projects or buildings during the construction period.
Includes:

• Civil structures (houses, buildings, bridges, roads).
• Materials and equipment used in the project.
• Losses due to work errors, fire, flood, or theft.
• Protection against third party liability (TPL).

2. Erection All Risks (EAR)

This insurance is intended for mechanical and electrical installation projects, such as:

• Installation of engines, generators, or HVAC systems.
• Large scale electrical work.
• Risk of equipment damage or installation errors.

These two policies can be combined or customized depending on the type of project and the contractor’s needs.

Insurance Obligations in Contract Documents

In many project documents, especially large or government-funded projects, there is a clause that requires active project insurance before implementation begins.

Usually called:

“The Contractor shall provide valid Contractor’s All Risks (CAR) Insurance covering all works during the construction period.”

If the contractor cannot provide proof of policy:

• Mobilization can be postponed.
• Installment payments may be delayed.
• The contractor’s personal risk increases dramatically.

Thus, including an insurance clause in the contract from the outset is a mandatory step to protect the interests of all parties — the contractor, the project owner, and the subcontractors.

Common Contractor Mistakes Regarding Insurance

There are still many contractors who make mistakes when it comes to insurance, such as:

• Postponing Police Purchase
  Many contractors only take care of insurance once the project is underway, even though risks can arise from the first day work begins.
• Buy Directly from Agent
  Agents only represent one company and cannot provide the best selection or extensive guarantees.
• Focus Only on Premium Price
  Contractors are often tempted by low premiums without understanding the policy’s terms. As a result, claims can be denied due to hidden exclusions.
• Don’t Understand the Claim Process
  When a loss occurs, many people don’t know how to report it, prepare documents, or communicate with the insurance company.

All these mistakes can be avoided by using a professional broker like L&G Insurance Broker.

Professional Solution: Use L&G Insurance Broker Services

PT Liberty and General Insurance Broker (L&G Insurance Broker) is an OJK-licensed national insurance broker with a strong reputation in the field of construction project insurance.

L&G has been a partner for hundreds of contractors, developers and EPC companies throughout Indonesia.

L&G Advantages:

• Free and accurate risk analysis.
• Negotiate the best premiums to national and international insurance companies.
• Claims assistance from start to completion of payment.
• Fast process: the policy can be issued in just 1–3 working days.
• Competitive premiums: starting from 0.15% of the project value.

L&G is not just a policy seller, but your risk advisor and financial protector.

Policy Closing Process Through L&G

To close a project insurance policy through L&G, contractors only need to prepare:

• Value of the project or work contract.
• Project implementation schedule.
• Project location.
• Types of work and main risks.
• Owner and contractor data.

Once the documents are received, L&G will:

• Analyze project risks.
• Choosing the best insurance company.
• Negotiating the most efficient premiums.
• Issue official policies in a short time.

Fast and Transparent Claim Process

One of the main reasons contractors trust L&G is its fast and thorough claims assistance.

The steps:

• Incident reports must be made within 24 hours of the incident.
• Surveyors (loss adjusters) are sent to the site to assess the losses.
• L&G assists in preparing complete claim documents.
• Once approved, claim payments are made within 7–30 business days.

With L&G’s professional support, contractors don’t need to worry about facing the lengthy bureaucracy that often occurs with direct claims.

Benefits for Contractors Working with L&G

• Comprehensive protection from financial and legal risks.
• Low premiums with extensive coverage.
• Full support from start to claim completion.
• Fast and transparent process.
• Reputation increases in the eyes of clients and employers.
• National network—serving projects throughout Indonesia.

Make CAR/EAR Insurance the Standard of Professionalism

In the modern construction industry, a professional contractor is not only one who can complete projects on time, but also one who has a strong risk management system.

Making CAR/EAR insurance a mandatory requirement in every project contract is a smart form of responsibility and protection.

Through PT Liberty and General Insurance Broker (L&G Insurance Broker), you not only get an insurance policy, but a trusted partner who ensures the continuity of your business.

📞Contact L&G Insurance Broker Now

Before signing your next project contract, make sure you have the best protection in place.

Consult your needs with the professional team of L&G Insurance Brokers, and enjoy fast, transparent service and competitive premiums.

HOTLINE L&G 24 JAM: 0811-8507-773(CALL – WHATSAPP – SMS)

Website: lngrisk.co.id

Email: halo@lngrisk.co.id

L&G Insurance Broker – Project Insurance Partner that Protects Contractors’ Interests Throughout Indonesia.