CAR/EAR/TPL Insurance Premium Calculation Simulation for All Types of Construction Projects

The construction industry in Indonesia continues to show positive growth, particularly in the infrastructure, property, energy, and industrial estate sectors. The government, along with the private sector, continues to promote the construction of toll roads, ports, airports, power plants, industrial estates, and property projects worth trillions of rupiah. All of this presents significant opportunities, but also carries with it increasingly complex risks.

In every construction project, there is one question that always arises from project owners, contractors, and investors: “How much does the premium cost? CAR/EAR/TPL insurance for this project?” This is a very reasonable question because insurance is not only a contractual obligation, but also a strategic necessity to protect investments.

This article will comprehensively discuss the risks of construction projects, the factors that determine premium costs, the importance of insurance underwriting information, the role of insurance brokers, and the real benefits you can get by choosing a trusted partner like L&G Insurance Broker.

Contact L&G Insurance Broker now at 08118507773 for a free consultation before the risks haunt your business.

1. Construction Project Risks That Must Be Managed

Construction projects are inherently risky activities. Some of these risks include:

• Technical risks – design errors, structural failure, material damage, or installation failure.
• Natural risks – floods, landslides, earthquakes, hurricanes, and tsunamis in the area vulnerable.
• Risk of work accidents – falling from a height, being hit by falling material, explosion or fire.
• Third party risks – damage to property belonging to surrounding communities, lawsuits, or injuries to third parties resulting from project activities.
• Financial risk – project delays due to disasters or accidents that cause cost overruns.

Without insurance, all these risks would be borne directly by the contractor or project owner. The resulting losses could reach billions to trillions of rupiah. Therefore, having Contractor’s All Risks (CAR), Erection All Risks (EAR), and Third Party Liability (TPL) insurance is crucial.

2. The Importance of Insurance Underwriting Information

Before insurance companies offer premiums, they require underwriting information. This data is used to assess the risk level of a project. Without complete information, insurance companies will tend to set higher premiums because the risks are perceived as unclear.

Some information that is usually required:

• Project profile: project name, project owner, main contractor, sub-contractors.
• Contract value: total project value in USD or IDR.
• Type of work: civil, mechanical, electrical, erection, or combination.
• Project duration: the time period for implementation.
• Project location: is it prone to flooding, earthquakes, or in a densely populated area.
• Working methods: whether using heavy equipment, advanced technology, or manual work.
• Contractor experience: has he/she ever worked on similar projects?
• Previous accident/loss history: claim data for similar projects.

The more complete and detailed the information provided, the greater the opportunity to get a competitive premium with more flexible terms and conditions.

3. Data Required for Premium Determination

In addition to underwriting information, insurance companies also require more specific quantitative data, such as:

• Construction value (sum insured) – includes the value of materials, labor costs, equipment costs, and additional costs.
• Equipment value – if the project requires heavy equipment to be insured.
• Duration of coverage – the longer the coverage period, the higher the premium.
• TPL (Third Party Liability) Limit – usually set from IDR 5 billion to IDR 100 billion, depending on the scale of the project.
• Deductible – the amount the insured must pay out-of-pocket before a claim is paid.
• Additional risk types – for example covering extended maintenance, testing & commissioning, strike, riot & civil commotion (SRCC), or natural perils.

With this data, insurance companies can simulate premium calculations based on actual project conditions. This is why each project can have different premium rates, even if the contract value is the same.

4. Factors that Determine Premium Costs

CAR/EAR/TPL premium rates are not fixed. Several factors significantly influence the premium amount:

Project type

• Civil works (toll roads, bridges, dams) → large structural risks, prone to flooding/landslides. Engineering & erection (factories, power plants, oil & gas) → high risk when installing machinery & equipment.

• Property projects (office buildings, apartments, malls) → more focus on fire risks & worker accidents.

• • Project contract value
    • The higher the contract value, the greater the insured value and automatically increases the premium.
  • Project duration
    • Long-term projects have longer risk exposure → higher premiums.
  • Project location
    • Projects in areas prone to earthquakes, floods, or social conflict are subject to a loading premium.
  • Contractor experience
    • Experienced contractors with a good track record usually get lower premiums.
  • Claim system history
    • If a company or contractor experiences frequent claims, premiums can be higher.
  • Cover typemore and more the more coverage is extended, the higher the premium.

5. Why Can the Premium for Each Project Be Different?

Many project operators ask why construction project insurance premiums don’t have a standard rate. The reason is that each project has unique characteristics.

Example:

• Project A: building an apartment in Jakarta with a contract of Rp 500 billion, flat location, low flood risk, experienced contractor.
• Project B: building a bridge in Papua with a contract worth IDR 500 billion, landslide-prone location, longer duration, new contractor.

Even though the contract value is the same, the premium for Project B can be 30–50% higher than Project A. This is due to differences in location, duration, work methods, and contractor experience.

In other words, construction insurance premiums are not just about numbers, but also about the risk management inherent in the project.

6. Types of Construction Project Insurance

• CAR (Contractor’s All Risks Insurance)

Guarantees physical risks of construction work, materials, and damage due to accidents.

Example: damage to bridge structure due to flooding.

• EAR (Erection All Risks Insurance)

More focus on installation of machines & equipment.

Example: turbine damage during installation at a power plant project.

• TPL (Third Party Liability Insurance)

Guarantee legal claims from third parties resulting from project activities.

Example: residents’ houses cracked due to vibrations from the project.

• Extended Maintenance Cover

Protecting work after the project is completed and enters the maintenance period.

Other additions

• Machinery breakdown during testing, SRCC, natural perils, dll.

These types of policies are often combined in one package to provide comprehensive protection.

7. Construction Insurance Premium Estimate

To give you an idea, here are premium estimates based on common practices in Indonesia:

1. Civil works projects: premium rates are around 0.10% – 0.25% of the contract value.
2. Mechanical & erection projects: premium rates are around 0.20% – 0.40%.
3. Third Party Liability (TPL): premiums are calculated separately, usually around 0.02% – 0.05% of the contract value with a certain minimum premium.

Simulation example:

Contract value for building construction project: Rp. 500 billion.

• CAR premium rate: 0.15% → Rp 750 million.
• TPL with a limit of IDR 20 billion → premium of IDR 150 million.
• Total premium: ± Rp. 900 million for a coverage period of 24 months.
• Please note that the figures above are only simulations. Actual premiums may be lower or higher depending on underwriting details and negotiations with the insurance company.

8. The Important Role of Insurance Brokers

Managing project insurance is no simple matter. Many contractors and project owners end up paying higher premiums because they don’t have the right partner.

This is where the role of an insurance broker like L&G Insurance Broker becomes very important:

• Comprehensive risk analysis – helps identify your project’s unique risks.
• Preparing underwriting information – compiling data and documents so that insurance companies can provide optimal rates.
• Premium & clause negotiation – ensuring maximum coverage at efficient premium costs.
• Claims support – accompanying clients in the event of an accident so that claims are paid in full and on time.
• Extensive networking – access to credible national & international insurance companies.

With a broker, you don’t just buy a policy, but get a comprehensive project protection solution.

9. Important Benefits of Insurance Brokers such as

Using the services of a broker like L&G provides a number of real benefits:

• Cost efficiency – more competitive premiums.
• Assurance of protection – policies are tailored to project needs.
• Save time – the administration and claims process is handled by the broker.
• Legal risk mitigation – ensuring contractual & regulatory compliance.
• Long-term support – not just at policy closure, but throughout the life of the project.

10. Conclusion

Every construction project, whether small-scale or mega-scale, carries significant risks that can threaten the smooth running and sustainability of the investment. Knowing how much your CAR/EAR/TPL insurance premiums cost is only the first step. More importantly, ensuring your policy truly provides optimal protection at a reasonable premium rate is crucial.

This is why you need an experienced insurance broker like L&G Insurance Broker. With extensive experience, digital system support, and an extensive network of national and international insurance companies, L&G is ready to help you obtain maximum coverage, competitive premiums, and comprehensive assistance throughout the claims process.

👉Don’t let risks hinder the success of your project.

Contact L&G Insurance Broker today and ensure every one of your construction investments is fully protected.

DON’T WASTE YOUR TIME AND SECURE YOUR FINANCIAL AND BUSINESS WITH THE RIGHT INSURANCE.

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Website: lngrisk.co.id

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