Engineering Insurance

ENGINEERING INSURANCE :

    In industries and factories, even in offices or at home, nowadays more and more machinery and equipments are being used. They are exposed to various accidental losses like fire, theft, accidental breakdown etc. Such losses not only cause financial stress on its owner but also hinder normal operation of the Industry. Apart from this, massive Engineering projects ranging from building of bridges to set up thermal power stations are very common in today’s era of industrialization. Major accidents or natural disasters like earth quake etc will cause immense losses to such projects. Engineering Policies are designed to provide coverage against such accidental losses.

TYPES OF POLICIES :

Broadly, various engineering policies can be classified as follows :

    1. Construction Phase Insurance (Project Policies) : These are one time policies issued for entire project period irrespective of whether the project period irrespective of whether the project period is a few days or a few years

  • Contractor’s All Risk Insurance (CAR
  • Erection All Risk Insurance (EAR) [also known as Storage-cum- Erection or SCE Insurance]
  • Marine – cum – Erection Insurance (MCE)

Operational Phase Insurance ( Annual Policies ) :

  • Machinery Insurance
  • Contractor’s Plant and Machinery Insurance
  • Electronic Equipment Insurance
  • Boiler and Pressure Plant Insurance
  • Deterioration of Stock Insurance (DOS)
  • Civil Engineering Completed Risk Insurance ( CECR)
  • Contract Works Insurance (CW)
  • Machinery Loss of Profit Insurance ( MLOP)
  • Boiler Loss of Profit Insurance ( BLOP)

(Project Policies) :

SCOPE OF COVERAGE :

All Risks (with certain exceptions) involved during storage, assembly, erection/Construction against:-

  • fire, lightning, explosion/implosion, aircraft damage, flood, storm, earthquake, landslide, theft, burglary, RSMD, terrorism, negligence, lack of skill, collision, impact, dropping, short circuit, electrical/mechanical breakdown etc

FEW OF THE EXCEPTIONS ARE AS UNDER :

  • Damage due to faulty design, defective materials etc. Wilful negligence, bad workmanship, Consequential loss say penalty for delay etc. Inventory losses War, nuclear reaction, Normal wear and tear, gradual deterioration etc

SUM INSURED :

The Sum Insured under Project Policies should represent the completely erected value of the project to be installed including freight, customs duties and erection cost. This should represent the current replacement value of the items when erected.

Following heads are to be taken for arriving at the Sum Insured:

  • Marine (Imports) -landed cost at site
  • Marine (Indigenous) -landed cost at site
  • Cost of Erection (exclusive of preoperative expenses but inclusive of cost of visits of specialists and supervision charges).
  • Permanent Civil Engineering Works
  • Half the escalated value, if escalation is opted for.
  • Pre- operative expenses.

Operational Phase Insurance :

ELECTRONIC EQUIPMENTS INSURANCE SCOPE

    With rapid computerisation and growing use of very sophisticated electronic machines, the demand for E.E.I policy is increasing every day. All Electronic equipments like Computers, Medical, Biomedical, Micro- processors; Audio/Visual equipments including the value of Systems Software may be covered under Electronic Equipment Policy. The term equipment shall also include the entire computer system consisting of CPU, Keyboards, Monitors, Printers, Stabilizers, UPS, System Software etc. The policy offers a wide ranging cover in following three sections -

    Section - I : Provides material damage cover to the main equipment

    Section – II : Provides cover to external data media used

    Section – III : Provides cover to increased cost of working which arises due to damage to the insured equipment

    Cover granted under E.E.I policy are virtually against all insurable perils namely fire, RSMD, Terrorism, Flood, Storm, subsidence, Earthquake, accidental breakdown while at work or rest, electrical damage, faulty manipulation, dropping, falling impact etc.

FEW OF THE EXCEPTIONS :

    Damage due to faulty design, defective materials etc. Wilful negligence, bad workmanship, Consequential loss say penalty for delay etc. Inventory losses War, nuclear reaction, Normal wear and tear, gradual deterioration etc

    War and Nuclear perils,Willful act/negligence,Pre existing defects/manufacturing defects, Normal wear and tear, gradual deterioration, Consequential loss of any kind Cessation of work. Aesthetic defects

    Dish Antenna is excluded from the scope of cover under this policy. Movable/Portable Electronic Equipments like testing and Biomedical equipments can be covered with loading in premium.

MACHINERY INSURANCE :

    All items of Plant and Machinery are susceptible to breakdown or damage irrespective of their quality or the maintenance. With the steady increase in cost of parts, labour and freight, repairs and replacements are becoming more and more costly day by day. Machinery Insurance Policy covers unforeseen and sudden damage to the insured Machinery while at WORK or at REST, during cleaning, inspection, overhauling or removal to another position within the premises

    War and Nuclear perils,Willful act/negligence,Pre existing defects/manufacturing defects, Normal wear and tear, gradual deterioration, Consequential loss of any kind Cessation of work. Aesthetic defects

A. Scope :

    All types of installed machinery can be covered under this policy against the following : Damage caused by - vibration, mal-adjustment, mal-alignment, defective lubrication, abnormal stress, centrifugal force, explosion/implosion, impact, collision, falling, faulty material, design, construction, excessive electrical pressure, failure of insulation, short circuit arcing failure of protective devices, entry of foreign material, lack of skill, carelessness; The main element of the insurance as may be seen above are Electrical & Mechanical breakdown and accidental damages.

B. Exceptions :

  • Fire, lightning, theft, subsidence, landslide, flood, storm, earthquake and other perils which can be covered under fire policy. Damage during experiments/overhauling or similar tests, normal wear or deterioration,willful act/negligence
  • Damage to exchangeable parts manufacturers defect war, nuclear reaction etc

C. Additional cover :

  • Insureds own surrounding property cover
  • Third Party Liability
  • Express freight overtime & holiday wages (Excluding Air freight)
  • Air freight
  • Additional Custom Duty

GENERAL PROVISIONS :

1. Sum Insured :

    Sum Insured of machinery covered should represent new replacement value including freight, Taxes, Customs Duty and installation cost.

DETERIORATION OF STOCKS INSURANCE (POTATOES) :

GENERAL REGULATIONS :

  • No policy to be issued on first loss basis
  • No policy to be issued with a bonus clause.
  • Excess amounts are minimum and cannot be eliminated by payment of additional Premium
  • Cold storages located outside India shall be out of the jurisdiction
  • For a single risk, different policies shall not be issued for different compartments
  • Rates and excess for compressors: For the compressors of size falling between two consecutive slabs provided in the guide rates, the rates and excess applicable for the higher slab shall be applied
  • DOS cover due to breakdown in the stand-by diesel generator sets.

Definition of cold storage :

  • New Cold Storage: New Cold Storage means the cold storage proposed for insurance for the first time. The date of construction is not material.
  • New additional chamber to the existing cold storage : Definition of new cold storage given above will apply to new additional chamber also. Unless the cold storage owners produce a certificate of prior insurance, the new additional chamber will be treated as new cold storage and rates, terms and conditions of new chamber to the old cold storage will apply.
  • Existing cold storage: Existing cold storage means cold storage presented for insurance not for the first time. The date of construction is not material. If the insurance is transferred from one Company to other, on renewal, the Company accepting transfer business will have to make sure that the insurance was taken by the insured with the previous Company for the previous year. For this purpose, the cold storage owner will have to produce a letter from the previous insurer that cold storage was insured during the previous season with Insurance Company. A simple statement giving Policy No. and the name of the insurer is NOT enough. If he fails to produce such a letter it will be taken that the insurance is taken for the first time and rates, terms and conditions for a new cold storage would apply
  • A cold storage which was already proposed for insurance couple of years back but was not insured for a period of one, two or three years (i.e. there was no continuity of insurance) and comes up again for insurance should be treated as "new cold storage."

Declaration facility :

Policies on declaration basis are permissible on the following terms and conditions.

  • This facility will be available to the insured in case value of he stocks, based on maximum capacity of the cold storage, is more than Rs.50 lakhs and period selected is 12 months. For periods lower than 12 months or for sum insured less than Rs.50 lakhs, no declaration facility will be available.
  • The insured shall submit fortnightly periodical declarations.
  • The premium for each month shall be calculated on value of maximum stocks held on any single day during the month. The premium for the total period shall be computed on this basis. (d) In case the insured fails to send periodical declarations, he shall forfeit right of declaration facility and no premium shall be refunded. N.B.:- For endorsement to be used, for 'Declaration Policies' For 12 months, refer 'Endorsements'.
  • Machinery Insurance policy issued to cold storages, can be endorsed to include electrical fire risk without charging any additional premium.
  • Rack structure collapse is not a machinery breakdown risk and hence should not be covered under DOS Policy.