What is Engineering Insurance
Engineering insurance is a specialized commercial policy that protects construction projects, machinery, and equipment against physical damage, mechanical breakdown, and associated liabilities. It covers both temporary risks throughout erection/construction and operational risks for completed facilities and heavy industrial plants.
Types of Engineering Insurance
The types of Engineering Insurance Plans offered are as follows:
Contractor’s All Risk (CAR) Insurance
The Contractors All Risk Insurance provides coverage against damage and loss to equipment and plants. This insurance plan revolves around the company's reference to on-site construction-related uncertainties. It is essential for civil engineering projects such as flyovers, buildings, airports, etc. Some Contractor’s Insurance also provides coverage against fire accidents that may occur during ongoing construction work.
Suitable For
- Commercial buildings
- Infrastructure projects
- Roads and highways
- Airports
- Industrial construction projects
Plant & Machinery Breakdown Policy
The Plant & Machinery Breakdown Policy provides coverage for losses from unexpected or sudden damage to various equipment and operational tools when they are in use. Generally, this policy covers both external and internal damage. Some of the internal damages may include defects of lubrication, overheating, electrical damage, etc. If one owns refrigeration units or a factory, this policy can also prove invaluable for protecting assets.
Suitable For
- Manufacturing plants
- Industrial facilities
- Cranes
- Bulldozers
- Loaders
- Graders
- Refrigeration units
- Production machinery
- Power generation equipment
Erection All Risk (EAR) Insurance
The Erection All Risk covered under this plan deals with the erection of plant and machinery structures. Additionally, it also includes activities of installation, machinery testing, and commissioning. The basic concept of equipment that we are talking about is engineering-inclined. For example, equipment such as bulldozers, excavators, trenchers, graders, loaders, pavers, etc., that depicts the on-site machinery used for construction.
Suitable For
- Manufacturing projects
- Renewable energy projects
- Industrial installations
- Power plants
Other Types of Engineering Insurance
Electronic Equipment Policy
Most of the time, this policy provides coverage to the devices and systems that can attract low power and voltage. So, the electronic equipment like UPS, computer, stabilizer, and medical equipment such as x-ray machine, ultrasound machine, etc., are covered. Under this policy, the insurance provider is responsible for the cost of repairs and replacement required to reinstate the former state of the devices and equipment.
Suitable For
- Hospitals
- Laboratories
- IT Companies
- Manufacturing Units
- Educational Institutions
Advance Loss of Profit Insurance Policy
Under this Engineering Insurance Policy, coverage for higher financial losses or costs incurred because of delays in a construction or infrastructure project is provided.
This policy is particularly beneficial for large infrastructure projects where project delays can significantly impact expected revenues and profitability.
Boiler Pressure Plant Insurance Policy
The boiler and pressure plant insurance plan provides coverage for the replacement and repair of equipment. This plan also has extended boiler insurance that covers the damages to third-party property or bodily injury caused by collapse or explosion.
Commonly Covered Assets
- Boilers
- Pressure vessels
- Steam systems
- Industrial heating equipment
What is Covered Under an Engineering Insurance Policy?
An Engineering Insurance Policy provides protection against a wide range of risks associated with construction projects, plant and machinery, installation activities, and operational equipment.
| Coverage Area |
Protection Offered |
| Construction Risks |
Damage during project execution |
| Machinery Risks |
Mechanical and electrical breakdown |
| Installation Risks |
Damage during erection and commissioning |
| Testing Risks |
Losses during testing and trial runs |
| Natural Perils |
Flood, cyclone, earthquake, storm |
| Human Errors |
Negligence and operational mistakes |
| Theft & Burglary |
Loss of insured equipment and assets |
Key Takeaway
Engineering Insurance Coverage helps businesses safeguard projects, machinery, and engineering assets against accidental damage throughout construction, installation, testing, and operational stages.
Engineering Insurance Inclusions
This is an ‘all-risk’ insurance policy that particularly includes:
- Strike, riot, and malicious acts.
- Lightning, fire, aircraft damage, explosion.
- Inundation, flood, cyclone, storm, and allied perils.
- Subsidence, landslide, and rockslide.
- Faults in an erection.
- Theft and burglary
- Negligence and human errors
- Excess voltage, short-circuiting, and arcing
- Mechanical and electrical breakdown
- Damage caused by foreign objects, impact damage, and collapse
- Any other sudden, unforeseen, accidental damages are not excluded explicitly
Engineering Insurance Exclusions
Some of the exclusions of the Engineering Insurance policy are:
- War invasion
- Contribution of the insured - deductibles
- Radioactive contamination, Nuclear Radiation, and Nuclear Reaction
- Wilful negligence and willful act of the insured
- Bad workmanship and defective material
- Cessation of work
- Oxidation deterioration and wear tear corrosion
- Glass breakage
- Shortage or disappearance
- Defects of design
- Loss of drawings, files, cheques, cash, etc.
- Terrorism
- Consequential loss
Engineering Insurance Add-Ons
The cover can be extended by including any of the following add-ons. However, the add-ons must be up to the limit that a policyholder has selected. For including any of these add-ons, the policyholder must pay an additional premium.
- Cross liability
- Third-party liability
- Earthquake
- Express freight, charges of overtime
- Debris removal cost
- Airfreight
- Escalation
- Additional custom duty
- Surrounding property of the owner
- Dismantling
- Storage risk at the premises of fabricators
- Extended maintenance and maintenance cover visit
You may also complement your Engineering Insurance Policy with additional protection such as Fire Insurance, Marine Insurance, Burglary Insurance, Professional Indemnity Insurance, and Cyber Insurance, depending on your project requirements.
Who Should Buy Engineering Insurance?
Engineering Insurance is ideal for businesses involved in construction, manufacturing, installation, and infrastructure development.
These Businesses Commonly Purchase Engineering Insurance:
- EPC Contractors
- Construction Companies
- Infrastructure Developers
- Manufacturing Units
- Renewable Energy Companies
- Power Generation Projects
- Engineering Consultants
- Industrial Plants
- Project Developers
TL;DR
Any business relying on engineering assets, construction projects, machinery, or industrial equipment can benefit from an Engineering Insurance Policy.
Real-Life Example of Engineering Insurance
A contractor was constructing a highway bridge when heavy rainfall caused a partially completed section to collapse, damaging construction materials and hired equipment. Since the project was covered under an Engineering Insurance Policy, the insurer compensated the cost of repairing the damaged work and replacing the affected materials, helping the project resume with minimal financial disruption.
Why Choose Policybazaar for Business?
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The sum insured should generally be equal to the total project value, including the cost of equipment, freight, customs duty, erection, and installation expenses, to ensure adequate coverage.
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Coverage generally starts from site mobilization and continues until project completion and handover.
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Yes, reporting all incidents helps maintain proper records and assists in claim assessment.
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Coverage typically begins when the first consignment arrives at the project site and continues through storage, erection, testing, commissioning, and handover of the project.
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Construction companies, EPC contractors, infrastructure developers, manufacturers, and industrial businesses should consider Engineering Insurance Coverage.
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