Liga Asuransi – Dear readers, how are you? Let’s continue discussing construction insurance. As we discussed in previous articles, the construction project falls under the high-risk category.
Therefore, it is very important for every project owner or developer to pay special attention to the risk aspects of the project to minimize the loss and manage insurance coverage.
One of the ways to overcome the risk of the project is to transfer it to an insurance company. Thus, if there is a risk there is an insurance company that will pay for the losses incurred.
To ensure that the insurance coverage for your project is set to the maximum, there needs to be the concern of the owner from the beginning when drafting a contract with the contractor.
As an insurance broker, according to our experience, not all contracts for construction projects in Indonesia already contain complete and comprehensive insurance provisions.
There are some contracts that have already included insurance for only several types, but there are also contracts that do not include insurance coverage in it at all.
In Indonesia, only companies engaged in the oil, gas, power/ energy, mining and infrastructure and property industries that are mostly in their contracts already have complete insurance requirements and are closely controlled by the project owners.
In this session, we will write down some tips that the project owner or developer needs to do before signing the contract with the contractor. Ensuring that all contract works should be included with all related insurance.
We hope that this article can help all project owners or developers to be able to improve the quality of project safety so that it provides benefits to all parties involved.
If you are interested in this article, please share it with your colleagues, so that they also understand as you do.
On average there are 9 types of insurance that need a single project. For more information, please click this link.
9 Guarantees and Insurance Required by Every Construction Project
Here are the 7 risks:
- Best insurance Security
For maximum security, prioritizing using the best insurance companies to cover the risks is a must. For your information, among 74 general insurance companies in Indonesia, only about 10 companies have the capacity to cover construction works.
Therefore, the contractor shall carry insurance (with insurance companies with a minimum Best’s Rating from other professional rating companies satisfactory to Owner) in the amounts set prior to the commencement of any Work under the Contract, and such insurance shall be always maintained in full force and effect Work is performed and/or this Contract is in effect.
- Waive of Subrogation
A waiver of subrogation is a contractual provision whereby an insured waives the right of their insurance carrier to seek redress or seek compensation for losses from a negligent third party. Typically, insurers charge an additional fee for a waiver of subrogation endorsement. Many construction contracts and leases include a waiver of subrogation clause.
Such provisions prevent one party’s insurance carrier from pursuing a claim against the other contractual party in an attempt to recover money paid by the insurance company to the insured or to a third party to resolve a covered claim.
In each such policy, to the extent of the liabilities agreed to be assumed by Contractor, Contractor shall cause (i) the insurer to waive all rights of subrogation against Owner Group, (ii) Owner Group to be listed as additional insureds, and (iii) such policy to be primary as to any other policy of Owner Group or otherwise.
- Insurance Policy or Certificate of Insurance
Before engaging in any Work, Contractor shall furnish the Owner an executed Certificate of Insurance (in a form satisfactory to Owner) evidencing the foregoing insurance.
The contractor shall cause each insurer to agree to give the Owner at least thirty (30) days written notice of cancellation or expiration of any such policies or of any other changes that would materially reduce the limits of coverage (or increase the costs to Owner) of such policies.
In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the policyholder, which determines the claims that the insurer is legally required to pay. In exchange for an initial payment, known as the premium, the insurer promises to pay for loss caused by perils covered under the policy language.
The insurance policy is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer. In some cases, however, supplementary writings such as letters sent after the final agreement can make the insurance policy a non-integrated contract.
- Failure to comply with insurance
Notwithstanding any provision herein to the contrary, failure to secure the insurance coverage, the failure to comply fully with any of the insurance provisions of this Contract, or the failure to secure such endorsements on the policies as may be necessary to carry out the terms and provisions of this Contract, (x) shall in no way act to relieve Contractor from the obligations of this Contract, and (y) shall constitute grounds for the immediate termination of this Contract by Owner (in addition to any other rights or remedies available to Owner).
- Maintain all insurance during the contract works
The Contractor to provide adequate insurance coverage on a comprehensive basis and to hold such insurance at all times during the existence of this Contract. The Contractor accepts full responsibility for identifying and determining the type(s) and extent of insurance necessary to provide reasonable financial protection for the Contractor and the Department under this Contract.
- Clarification of the contract
Upon the execution of the contract, the Contractor shall furnish the Contract Manager written verification of such insurance coverage. Such coverage may be provided by a self-insurance program.
- Primary Insurance
Contractor’s Insurance shall Be Primary Contractor’s insurance policies, with respect to any claims shall be primary with respect to all other sources of coverage available to Contractor. Any County maintained insurance or self-insurance coverage shall be in excess of and not contribute to any Contractor coverage.
Primary insurance is a policy that pays for coverage first, even when the policyholder has other policies that cover the same risk. Those other policies will only be tapped when the primary policy has reached its financial limit.
The importance of Insurance Broker for construction risks
As explained above, the risks faced by any construction project are high. Risks can be caused by natural disaster factors such as floods, landslides, earthquakes, and volcanic eruptions. There is a risk of accidents due to errors and negligence in the operation and malicious intentions of others.
Frankly in Indonesia, there are not many insurance companies that are interested in covering construction risks. Therefore, it needs help from an experienced insurance brokerage company to get back up of insurance.
An insurance broker is an insurance expert who is on your side (the insured). The broker designs insurance programs that meet your project needs.
Another important task of the insurance broker is to help settle claims if they occur.
One insurance company with extensive experience in the field of project construction insurance is L&G Insurance Broker.
For your project 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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