Dear readers, how are you? Continuing our previous articles, this time we will be talking about one of the requirements contained in the project construction insurance policy or better known as Construction Erection All Risks and Third-Party Liability insurance (CAR /E/AR/TPL).
CAR/EAR/TPL insurance policy is an insurance policy that provides coverage for damage and loss of materials and construction works as well as lawsuits due to injury, death, or damage to third-party property.
Property damage includes the construction of the structure, damage incurred during renovations, and damage to temporary work carried out on the project site.
Although each construction project has a variety of risks, each has almost the same type of threat and risk, namely the risk of theft, loss, or damage to the tools, equipment, and materials that you own and use.
If you do not provide CAR/TPL insurance for the project, in case of an accident happen, you are most likely unable to meet the obligation to complete the contract within the allotted time which in turn may result in further financial costs that you incur including penalties.
The parties who need CAR / TPL coverages include project owners, developers (developers), banks, main contractors (main contractors), subcontractors (sub-contractors), consultants (consultants), and suppliers.
After you get the car /EAR/TPL insurance policy then you need to understand the coverages provided, the risks that are not covered, and the requirements that must be met so that the insurance coverage runs well.
If you do not follow and meet the requirements contained in the insurance policy, you can be disappointed because the accident and loss you may experience are not covered by the insurance policy.
But unfortunately, it is not easy to understand insurance policies. Only certain people, especially those who work in the insurance industry understand it better.
One of the best ways to get insurance coverage is to use the services of an insurance broker company.
Insurance brokers are insurance experts whose duty is specifically to help insurance customers to get the best insurance coverage. Negotiate the most competitive premium rates with several insurers. As well as assisting you in the resolution of claims if they occur.
As a senior insurance broker, this time we would like to explain one of the requirements that the insured needs to meet when buying an insurance policy. That is material changes (material changes).
For this, we use CAR/EAR/TPL insurance policy with the Munich Re Wording standard that is widely used in Indonesia and around the world.
If you are interested in this article, please share it with your colleagues so that they also understand like you.
Original Wordings:
- The Insured shall immediately notify the Insurers by telegram and in writing of any material change in the risk and cause at his own expense such additional precautions to be taken as circumstances may require, and the scope of cover and/or premium shall, if necessary, be adjusted accordingly.
What are Material Facts
You need to know that insurance coverage is provided by the insurance company based on information from the circumstances submitted at the beginning of the insurance coverage it started.
When applying for insurance, you will be required to disclose all material facts that may affect the risk. Why, because the legal basis in insurance says that you know everything about the risks you want to insure, and the insurance company does not.
For the insurance company to choose the risk it wants to insure, at the right price and on terms and conditions that reflect your risk, you as the sole party with such information must declare all relevant information to the insurance company. This is called a material fact.
If you fail to disclose (called non-disclosure) or misjudge and decipher the facts, then you run the risk of the insurance company paying only a portion of the claim, refusing to pay all claims, and possibly, declaring the policy invalid.
Your job is to disclose accurate material facts before the insurance coverage begins, including information that will influence the insurance company to accept the risk and provide the level of coverage and the level of premium to be charged.
But over time there is a possibility of conditions changing. For example, there are design changes, changes in surrounding conditions or security turmoil, and others.
If there is a change that can increase the risk or potential risk, then the insured must immediately notify the insurance about the occurrence of the company.
If there is an increased risk of potential accidents then you should take the initiative to reduce the risk, trying to prevent it at your own expense.
Furthermore, the insurance company will decide what changes they will do, for example, they will still provide coverages but with additional premium costs, add new requirements, or even cancel the insurance coverage.
This action relates to the principle of Utmost Good Faith in insurance principles of the insurance contracts. Where you as the insured still try your best to avoid disasters.
If there is no good faith, then the insurance can cancel the policy or refuse payment of the claim if it occurs.
How to maintain your insurance after a material change?
As we know that your insurance policy is an agreement to transfer the risk from you to your insurance company. At the time you apply for coverage, your insurance company calculates your premiums and coverage terms based on the information you provide.
When your situation changes, it can affect or even cancel your coverage if the risk has not been reassessed.
Not all changes can cancel the policy. Only material changes are defined as “substantial and sustained changes that affect and increase the risk to your project’s insurance coverage”.
Although rare, physical changes on the field can occur. For example, there is a new project belonging to someone else next to your project. The project can affect the risk to your project, for example, there is a potential for fire originating from the project. There can be land movement because of the construction of foundations on the project.
Changes in risk can also occur if there are change parties involved in the project, such as the replacement of contractors and subcontractors. Material changes, changes in machine and equipment specifications.
How to find the best CAR/EAR /TPL insurance?
From the explanation above many provisions and requirements need to be known for maximum insurance coverage.
Therefore, it is not easy to get the best insurance coverage. The best way to get CAR/EAR / TPL insurance coverage is to use the services of an experienced insurance brokerage company or an insurance broker.
An insurance broker is an insurance expert who understands all aspects of insurance including legal aspects, technical aspects, financial aspects, and business aspects.
One of the advantages of insurance brokers is that they also act as insurance advocates in the process of settling claims. With knowledge and experience, a wide network in the insurance industry is very helpful in facilitating and speeding up the process of resolving insurance claims.
One of the national insurance brokers companies in Indonesia that have a lot of experience in CAR/EAR / TPL insurance is L&G Insurance Broker.
For all your insurance needs contact L&G right now!
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L&G HOTLINE 24 HOURS: 0811-8507-773 (Call – Whatsapp – SMS)
website: lngrisk.co.id
E-mail: customer.support@lngrisk.co.id
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