General insurance companies offer ‘plant and machinery insurance’ plans. The insurance plan can fulfil the requirements of contractors and trades-men. The contractor deploys own equipment or hires equipment at the construction site. The damage or loss associated with the machinery can be covered by the insurance policy. While executing various kinds of projects, businesses may incur losses due to the breakdown of machines. The timely completion of the project is important. If the contractor fails to complete the project before the tolerance limits, heavy penalty should be paid to the client. These risk factors can be avoided by buying a comprehensive policy to cover the plant and machinery.
Who Can Buy the Insurance?
The plant and machinery insurance can be bought by contractors and businesses. If there is an anticipation of breakdown or damage of the earthmoving equipment or machinery, the insurance policy can be purchased.
A policy can be purchased by a principal contractor or a sub-contractor. The machines which undergo the repair and maintenance jobs will also be covered by the policy.
- Individuals - owner of one or more earthmoving machinery or excavation devices
- Financial institutions which invest in construction projects
- The actual user of the machinery
- Contractors - To cover his own equipment or the hire equipment
The construction machines will play an important role in undertaking various kinds of large projects. The heavy machinery is used in the construction of buildings, bridges, roads and manufacturing units. The country’s economy will move forward by providing the basic infrastructure like roads, bridges, and power supply.
Benefits of Plant and Machinery Insurance
The plant and machinery policy will protect your assets and revenues. It is possible to secure your projects and there will be an enhancement of profits. The machines can be protected in the best possible way.
The policy covers the following risk factors:
- Construction equipment such as excavators, cranes, forklift trucks, bulldozers, compressors, pile driving devices, drilling machines and other heavy machinery
- The accidental loss at the construction premises
- The mobile machinery is covered during idle condition as well as running condition.
- The insurance coverage is applicable while overhauling, cleaning and re-erection of the equipment
- Add-on cover can be bought to get extensive coverage against various kinds of perils such as earthquake, terrorism and third-party liability
- The downtime of machinery can be reduced and the operational efficiency can be enhanced
Features of the Insurance Policy
SA-The sum assured will be equivalent to the replacement of the damaged item with a new item. The replacement will be done with the same quality and quantity of items (in terms of specifications). The replacement cost includes the procurement cost (customs charges and freight charges are included).
Insurance Premium - The following factors will influence the insurance premium.
- The type of equipment
- Make and model of equipment
- Purpose of equipment
- Frequency of usage
- Risk factors associated with using the equipment
- Type of project
Extension of the Policy - You can extend the benefits of the policy by opting for various add-ons.
- Air shipment charges
- Express shipment charges (holiday or overtime wages are covered)
- The property surrounding the owner
- Escalation risk
- Act of terrorism
- Earthquake and landslides
- Clearance and elimination of debris
- Customs duty
Proposal Form- The insurance proposal form should contain the list of the equipment/machines/devices which should be covered by the insurance policy. A single policy can be purchased to cover various kinds of risks associated with the machinery. The cost of the equipment should be mentioned in the proposal form.
Excess - The excess will be decided by the insurance company based on the SA of the machine, type of machine and act of God peril, etc.
Enhancement of the Insurance Cover
If the existing standard cover offered by the insurance fails to fulfil your needs, you will want to go for additional coverage.
Exclusions of the Insurance Policy
While the ‘plant and machinery insurance policy’ will do a lot of good by protecting the business interests of the equipment owner, there are certain exclusions imposed by the insurance policy. The policyholder should be aware of these exclusions and should be prepared to handle additional expenses by adopting alternative means.
- The policy will not cover pre-existing malfunction or defect
- Mechanical or electrical breakdown
- The damage caused to the design by the manufacturer
- The damage caused during the supply of the product
- Using the machinery with wrong coolant or no coolant
- Damage associated with the negligence of the equipment owner
- Damage due to the explosion of the pressure vessel or boiler
- Using the machinery for an application which is not recommended by the manufacturer
- Rust and depreciation of the vehicle by not using it
- Crafts used on water
- Damage due to immersion in natural calamities (tidal waves)
- Parts which undergo wear and tear due to regular usage (bolts, nuts, etc.)
- Public liability (when the machinery is deployed on public roads)
- Damage due to war, war-like situation and terrorism
- Wilful negligence of the equipment by the operator, representative or owner
How to Claim?
The damage that occurs to the insured plant machinery can be brought to the notice of the insurance company at the earliest. The rules and regulations stipulated by the insurance company should be followed by the policyholder.
The information or intimation about the damage should be made to the insurance company within 14 days of the event. Failure to intimate the insurance company within the due date makes the insurance company not liable for the damage.
The following actions are warranted:
- Sharing information about the breakdown or loss in a proper format to the insurance company
- Offer support to the surveyor deployed by the insurance company
- Submission of claim form along with supporting documents
- The financial loss suffered due to the breakdown of the plant machinery should be documented and presented to the insurance company
How will the loss be settled by the insurance company?
After submitting the claim form by the insured, the insurance company will follow the procedure to speed up the settlement.
Damage of the item-If the damaged item can be repaired the insurance company will pay the expenses towards the restoration of the item to its original condition.
- The insurance company will also bear the cost of dismantling
- The re-erection of the equipment
- Ordinary freight charges to and from the repair shop
- Customs duties
- Other dues (if any) as per the sum assured by the insurance policy
Repair of the Item at the Workshop
If the workshop is owned by the insured, the following charges are paid by the insurance company:
- Cost of materials
- Cost of wages towards the repair of the item
- Percentage of overhead costs at reasonable calculations
If the parts are replaced, the insurance company will not deduct money to-wards the depreciation. However, the salvage value will be accounted and the amount will be adjusted accordingly.
Destruction of the Item -
If the policyholder’s item is destructed, the insurance company’s liability is up to the actual replacement value of the item before the occurrence of the event.
The charges include
- Freight charges (ordinary freight)
- Erection cost
- Customs duties
The actual value will be calculated after deducting the depreciation value of the item. Hence, the salvage value will be taken into consideration.
If the insurance company agrees to the following excess charges in writing, they will be paid to the insured:
- Night work charges
- Overtime charges
- Compensation for work on public holidays
- Express freight
Charges not covered by the policy
- Cost of alteration
- Cost of addition
- Cost of improvement
- Cost of overhaul
If there are provisional repairs, they should be borne by the insurance company. However, the provisional repairs should be part of the final repairs and the total cost of repair will not exceed by undertaking the provisional repair.
What are the Terms and Conditions of the Insurance Policy?
As the general insurance company will take great risk by offering the ‘plant and machinery insurance policy’ to the insured, the following terms and conditions will be implemented by the insurance company:
- Precautions by the Insured - The insured should take all possible precautions to keep the equipment/machinery in good condition at storage point or while using the equipment
- Manufacturer’s Recommendations - The insured should follow the recommendations of the manufacturer in keeping the equipment in safe condition.
- Periodic Maintenance - The preventive maintenance of the equipment should be followed by the insured as per the guidelines or schedule of the manufacturer
- Usage of the Machine - The machinery or equipment should be used at locations permitted by the manufacturer. The usage of the machinery should be done as per their capacity. The temperature limits and controls provided in the machine should be followed.
- Trained and Skilled Personnel - The equipment should be used by trained, skilled and licensed persons. If the usage of the equipment is done by unauthorized, the insurance will be null and void.
- Inspection by the Insurance Company - The representative of the insurance company may visit the plant and machinery with prior intimation to the insured. The insured should arrange to visit for the agent/representative of the insurance company and should offer full cooperation by providing complete information and details about the equipment.
- Change in Risk Perception - If there is change in the risk perception, the insured should notify the insurance company immediately. The insurance should be communicated in written form either by telegram, fax or email as per the mode of communication established by the insured and the insurer.
- Change in Premium or Sum Assured - If there is a change in risk perception, the insurance company may increase or decrease the premium after inspecting the property. Similarly, the sum assured can be decreased if the risk perception is high. If the insured is willing to pay a higher premium, the sum assured can be continued without any issues.
- Steps to Minimize the Loss - If there is a loss (or damage) of the power equipment or machinery the insured should take all possible steps to minimize the loss. The parts or items that are damaged should be preserved as they will go through the assessment by the company appointed representative. The insured should provide documentary information about the damage (including photos and videos). If there is loss due to theft or burglary, the information should be shared with the local police station.
- Dispute Resolution - If there is dispute between the insured and the insurance company, it should be resolved through the mediation and negotiations. If the dispute cannot be settled, you can approach insurance ombudsman. Finally, it can be referred to the competent court of law as well.
- Return of Premium - In some cases, the insured can return the policy in writing to the insurance company. The insurance company will pay the money for the unused period. The payment will be done in proportion to the unused period. If a claim is submitted by the insured, the insurance company will not pay the premium as the risk coverage was fulfilled by the insurance company.
The ‘plant & machinery insurance policy’ will cover various kinds of risks in using and maintaining heavy machinery at construction sites. The policy can be subscribed by small as well as large businesses. The policyholder can exercise an option to cover selected machines or all machines as per the terms and conditions of the policy. Unwanted business losses can be prevented by buying the insurance policy. As the cost of the heavy machinery is huge, there will be great loss due to the breakdown of machines. It will lead to loss of man-hours as well as machine hours. Hence, timely replacement can be down by subscribing to the most appropriate insurance plan.
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