How to Get the Right Builders Risk Insurance in Batam
A real claim case study from a Batam shipyard, and the steps to choosing a Builders Risk policy that truly protects your project.
Understanding the Risk
Why Builders Risk Insurance Gets Overlooked, Despite the High Stakes
Once a construction project or a ship repair job kicks off, attention is almost entirely absorbed by schedules, budgets, and technical execution. Insurance often gets treated as administrative paperwork that can be sorted out "later" — until an incident happens mid-project and everyone realizes an asset worth billions of rupiah was never properly protected.
Builders Risk insurance (sometimes also written as Contractors' All Risks or Erection All Risks) was built specifically to close that gap: it protects a project while it is being built, not an asset that is already finished. For projects like building construction, plant installation, and especially ship construction or repair at a shipyard, the construction period itself is exactly when the project is most exposed to major loss.
Field Experience
Case Study: A Builders Risk Claim at a Batam Shipyard
One case I handled directly involved a shipyard in Batam carrying out a repair and structural modification project on a commercial vessel. The work involved welding, replacing hull plating, and reinstalling part of the mechanical system in the dock area.
Midway through the job, a small fire broke out, originating from welding activity near combustible material nearby. The yard's team managed to extinguish it quickly, but the fire still caused damage to part of the structure under work, as well as some equipment on site.
Here is how the claim was handled in that case:
| Stage | What Happened |
|---|---|
| Initial notification | The shipyard reported the incident to the insurer within 24 hours, before cleaning up the site |
| Site preservation | The affected area was isolated; no repairs were made before the survey |
| Loss adjuster survey | An independent surveyor assessed the extent of damage to the structure and equipment, and estimated repair costs |
| Sum insured & wording verification | Checked whether the insured value matched project progress, and whether the cause of the fire fell within the policy's coverage |
| Negotiation & loss adjustment | The claim value was adjusted based on the survey findings, less the deductible per the policy |
| Claim settlement | Funds were released to cover structural repairs and replacement of damaged equipment |
Insight from the field: This claim went through relatively smoothly, and that was no accident. On the advice of an insurance consultant, the shipyard had already set its sum insured to be adjusted periodically against project progress (rather than a fixed value locked in at contract signing), and the policy explicitly listed every subcontractor working in the dock area as a covered party. Those two details are the most common source of disputes in Builders Risk claims that were not properly prepared.
Policy Coverage
What Is and Isn't Covered Under a Builders Risk Policy
Builders Risk is one of the products within the marine insurance line we handle in Batam, with coverage characteristics specific to the construction period. Generally speaking, here is how covered risks and exclusions break down:
✓Covered
- —Fire, explosion, and lightning strikes at the project site
- —Damage caused by workplace accidents or heavy equipment operator error
- —Natural disasters: flood, strong winds, earthquake (usually as extended cover)
- —Theft of material or equipment installed on site
- —Damage occurring during testing and commissioning, per agreed wording
✕Excluded
- —Loss caused by pre-existing design defects
- —Normal wear and tear and gradual damage from regular corrosion
- —Delay penalties or consequential loss (unless a specific extension applies)
- —Loss occurring after the maintenance period ends without an extension of cover
Practical Steps
Steps to Choosing the Right Builders Risk Insurance
Map the Specific Risks of Your Project
Building construction, plant installation, and ship repair at a shipyard each carry a different risk profile. Before buying a policy, identify the trouble spots: is there hot work involved (welding, cutting), areas with combustible material, or high-risk work at height?
Set the Sum Insured Based on Full Contract Value, Not Current Progress
The most common mistake is setting the sum insured based on work already completed, when it should instead be based on the project's total contract value plus the cost of materials and equipment yet to be installed. An insured sum that's too low triggers proportional reduction (average clause) when a claim is made.
Make Sure Every Party on Site Is Covered as an Insured
If the project involves subcontractors, make sure the policy explicitly names them as a joint insured or additional insured. Without this clause, the insurer could deny the claim or pursue recovery (subrogation) against subcontractors who are, after all, your own working partners.
Check the Insurance Period and Maintenance Period
A Builders Risk policy typically runs from the mobilization of materials to the site through to project handover, plus a maintenance period (usually 12 months). Make sure this period actually matches your real project schedule, including any potential delays.
Read the Wording and Exclusions Carefully, or Bring In a Consultant
A single exclusion clause can determine whether a claim worth hundreds of millions of rupiah gets paid in full or denied. Working with an insurance consultant who understands the nature of construction and shipyard projects — not just shopping for the cheapest premium — is the step that most often saves a project when an incident actually happens. You can review our Builders Risk policy coverage here.
Frequently Asked Questions
FAQ About Builders Risk Insurance
What is Builders Risk insurance?
Builders Risk insurance (also known as Contractors' All Risks or Erection All Risks) covers physical loss or damage to a project under construction — including a vessel being built or repaired at a shipyard — caused by risks such as fire, workplace accidents, or natural disasters during the construction period.
Do shipyards in Batam need Builders Risk insurance?
Yes. During construction or repair, a vessel cannot be insured under a standard marine hull policy because it is not yet complete or seaworthy. Builders Risk fills that protection gap from the start of the project until handover.
How long does a Builders Risk claim usually take to settle?
It depends on the complexity of the loss and how complete the documentation is — generally a few weeks to 2-3 months for larger losses that require in-depth investigation by the loss adjuster.
What is the most common mistake when buying a Builders Risk policy?
Setting the sum insured too low (under-insurance), failing to include subcontractors as covered parties, and not checking exclusions related to design defects, which are a frequent source of claim disputes.
Does Builders Risk cover subcontractor work?
It depends on the policy wording. The policy needs to explicitly list every party working on the project as a joint insured or additional insured, so there is no gap in liability when a claim occurs.
Free Consultation
Starting a Construction Project or Shipyard Job?
I help set the right sum insured, make sure every relevant party is covered under the policy, and support you if a claim ever actually happens — based on hands-on experience handling claims in the field, not just comparing premiums.
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