Engineering / Construction Insurance

Insurance that provides economic safeguard to the risks

faced by the ongoing construction project, installation
project, and machines and equipment in project operation

Construction Insurance Categories

Construction All Risks Insurance
Erection /Installation All Risks Insurance
Based on attribute of the object,
Project all risks insurance
Machinery breakdown insurance
 ERECTION ALL RISKS (EAR)
INSURANCE
EAR insurance provides a very wide and
comprehensive insurance cover to the client in respect of
any sort of contingency from the moment the material is
unloaded at the site of the project and continues during
storage, physical erection commissioning, testing and
maintenance (if covered).

Since the duration of the cover can be as long as 36/48

months or even more, care must be taken while
negotiating the proposal as well as assessing the moral
hazard of the client.
 SCOPE OF COVER
A comprehensive insurance cover that is available to
the client in respect of any sort of contingency from the
moment the materials are unloaded on the site of the
project / works and continuous during storage,
physical erection and till the test run is over which
covers all physical losses or damage like-

Fire, lightning, theft & burglary.

Impact from falling objects, collision, failure of
changes or tackles.
Failure of safety devices, leakage of electricity,
insulation failure, short circuit, explosion.
Carelessness, negligence, fault in erection, strike &
riots.
Storm, tempest, flood, landslide, rockslide,
earthquake.
 EXTENSION OF COVER
While the standard policy include all Acts of God
perils, it has to be noted that the earthquake peril is
covered at an appropriate additional premium as per
the erection tariff.

Extension of basic cover to provide for extension of

the policy period itself can be given at additional
premium per erection tariff.

Dismantling cover in case of already erected second

hand plant can be given at an appropriate additional
premium as per tariff.

Additional premium are also chargeable for the

removal of debris, contractors plant and equipment,
third party liability, if they are to be included in the
sum insured.
 CONTRACTORS ALL RISKS (CAR)
CAR policy may be taken by the principal or by the
contractor( According to terms of the agreement between
the contractor and the principal)
It is obligatory on part of the contractor to effect a CAR
insurance in their joint names before the commencement of
the project.
The sum insured under the policy must not be less than the
full value of the contract works at the completion of
contract inclusive of all materials, wages, freight, custom
duties, construction cost and material or items supplied by
the principal.

TYPE OF PROJECTS

The CAR insurance policies generally issued for all types of

Civil Engineering projects like dwellings, office building,
commercial building, go downs and warehouses, hospitals,
schools, silos, steel structure, roads, water supply lines,
construction work, etc.
 EXTENSION OF COVER

While the standard policy include all Acts of God perils, it

has to be noted that the earthquake peril is covered at an
appropriate additional premium as per the erection tariff.
Extension of basic cover to provide for extension of the
policy period itself can be given at additional premium per
erection tariff.
Dismantling cover in case of already erected second hand
plant can be given at an appropriate additional premium as
per tariff.
Additional premium are also chargeable for the removal of
debris, contractors plant and equipment, third party
liability, if they are to be included in the sum insured.
 MATERIAL DAMAGE SECTION

The Scope of insurance is virtually the same as that of EAR

insurance. Under this section the insurer agreed to
indemnify for any loss or damage to the insured property
by any cause other than those specifically given under the
exclusions.
The various exclusions under the CAR policy:
General exclusions (applicable to Section I and Section II).
Exclusions applicable to Section II - Third Party liability.
Exclusions applicable to Section I - Material Damage
are exactly the same as under EAR Policy.
 MACHINERY BREAKDOWN (MB)
Machinery Breakdown insurance was developed to grant industry
effective insurance cover for expensive plant, machinery and
mechanical equipment. This insurance is important for everyone who
operates the machines. This policy should support our property
insurance and hence this insurance must not be granted on a stand -
alone basis.
SUBJECT MATTER INSURED
All types of machinery, plant, mechanical equipment and apparatus
may be covered under MBD insurance, such as for example power
generating units, power distributing plant as well as production
machinery and auxiliary equipment, etc.
SCOPE OF COVER
By its nature, Machinery Breakdown Insurance is an accident
insurance on machinery. Thus,
It covers unforeseen and sudden physical loss of or damage to the
insured items.
Faulty design faults at workshop or in erection, defects in casting and
material.
Faulty operations, failure of safety system / lubrication system /
control system, lack of skill, negligence.
 EXTENSION AVAILABLE UNDER THIS POLICY

Third party liability.

Expediting costs.
Additional customs duty.
 BOILER AND PRESSURE PLANT (BPP)
This policy covers explosion of boilers and pressure plants but does
not cover rupture of tubes inside the boilers. Both these perils can be
covered under MB policy and hence we should wherever possible
include this in our MB portfolio since it would practically mean
granting extra cover within the scope of tariff provisions.
TYPES OF EXPLOSIONS
It can be broadly classified under two categories for the purpose of
insurance cover.
Chemical Explosions
It is a matter of common knowledge that gun powder, similar explosive
compound could cause explosion under the influence of mechanical or
thermal shocks. Highly inflammable fluids and dusts can cause
explosions if their concentration in the atmosphere exceeds the
explosive limits. From the insurance concept, these explosions are
considered as very rapid form of combustion.
Physical Explosions
In respect of pressure vessels handling inert fluids such as steam,
explosion can occur due to variation in fluid pressure. The variation
being only in physical form and there no chemical reaction or changes
responsible for such explosions as such these are classified as Physical
Explosions.
 SCOPE OF COVER
The policy covers pressure vessels both fired &
unfired against the risk of explosion and
collapse and indemnified the insured against:
Damage to the boilers & / or other pressure
plant.
Damage to surrounding property of the insured
or the property held by the insured in trust for
which he is responsible.
Death or bodily injury to any person.
Damage to property not belonging to the
insured or held in trust or on commission for
which he is responsible.
 EXCEPTIONS OF POLICY
Loss or damage raising from fire and allied
perils which can be covered separately.
Damage by chemical explosion except in
recovery boilers and waste heat boiler.
Contractual liability, manufacturers suppliers
liability.
Loss arising from an existing defect.
War group of perils, social group of perils.
Nuclear perils.
Loss due to gross negligence.
Failure of individual tubes.
 OTHER EXTENSIONS AVAILABLE UNDER THIS POLICY

Steam Pipes
The portion of the steam pipe up to the safety valve alone is
deemed to form integral part with boiler. The remaining
portions of the steam pipes can be included under this
extension.
Expediting Costs
Expenses towards overtime, night work, work on public
holidays, express freight can be included under this extension.
The same will be indemnified after a loss provided these
expenses are incurred following a loss due to an insured peril
under this policy.
Air Freight
Expenses towards air - lifting parts of the boiler following a loss
can be included under this extension.

Policy Period: This policy is issued on annual basis.

 CONTRACTORS PLANT & MACHINERY (CPM)
Whilst it is possible to have the Contractors plant and
machinery covered under an EAR or CAR policy at specific
project sites, CPM policy has been designed to provide a cover
on an annual basis to a contractor who may be using his plant
and machinery at different projects during the course of the
year. The cover under a CPM policy is not limited to a specific
project site and is operative at all sites wherever the plant and
machinery is in use and even while the same is lying at the
contractors own premises. We therefore have to ensure that all
the sites where the insured items are being used are mentioned
on the face of the policy.

SCOPE AVAILABLE UNDER CPM POLICY

The Contractor's plant and machinery insurance comes under the policies
available under the Project Insurance and like the EAR / CAR Policy offers a
comprehensive cover as given below:
Fire, lightning, external explosion, earthquake, flood, inundation, subsidence,
landslide and rockslide.
Storm, tempest, hurricane, typhoon and tornado.
Burglary, theft, riot and strike and malicious damage.
Accidental damage while at work due to faulty man - handling, dropping or
falling, collapse, collision and impact.
 EXCLUSIONS
The insurer will not indemnify in respect of loss or damage given
below:
Excess as stated in the policy schedule, which has to be borne by the
insured in any one occurrence. If more than one item is lost or
damaged in one the occurrence insured has to bear the highest single
excess applicable to such items.
Loss or damage due to electrical or mechanical breakdown, failure
breakage or derangement freezing of coolant or other fluid, defective
lubrication or lack of oil or coolant, but if as a consequence of such
breakdown or derangement an accident occurs causing external
damage, such consequential damage will be indemnifiable.
Loss of or damage to replaceable parts and attachments such as bits,
drills, knives or other cutting edges, saw blades, dies, moulds, patterns,
pulverizing and crushing surfaces, screens and sieves, ropes, belts,
chains, elevator, and conveyor bands, batteries, tyres, connecting wires
and cables, flexible pipes, joining and packing material.
Loss or damage due to explosion of any boiler or pressure vessel
subject to internal steam or fluid pressure or of any internal
combustion engine.
Loss of or damage to vehicles designed and licensed for general road
use unless these vehicles are exclusively used on construction sites.
Loss or damage to the hull and machinery of water borne vessels.
 Loss or damage while in transit from one location to another
location.
Loss or damage due to wear and tear corrosion, rust etc.
Loss occurring while an insured item is undergoing any test.
Loss to any plant or machinery working underground.
Losses arising out of war and war like perils and due to nuclear
radiation or radio active contamination.
Damage due to faults or defects existing at the time of
commencement of the policy with the knowledge of the insured.
Any willful act or gross negligence of the insured resulting in a
loss.
Loss for which the supplier or the manufacturer is responsible.
Loss discovered only at the time of taking the inventory or
during routine servicing.
Loss to plant and machinery mounted or operated on a floating
vessel / barge.
 ELECTRONIC EQUIPMENT INSURANCE (EEI)
The Electronic Equipments such as computers, Micro - processors, Word -
processors, Tele - communication equipments. Machine meant for medical use
and other misc. Equipments like films, television studio equipments can be
covered under this policy. This scope of this policy is ALL RISK.
SCOPE OF COVER
This insurance indemnifies the insured against any physical loss or damage due to
following perils:
Location Perils
Fire, lighting, explosion, flood, storm, etc.
Break Down
Any electrical / mechanical breakdown.
Faults
Faulty design, faulty materials, faults in manufacturing / assembly erection.
Effect of Moisture
Damage due to moisture and humidity.
Carelessness
Damage due to faulty / careless / negligent operation by employees.
Riot & Strike
Riot & strike damage and malicious damage.
 SUBJECT MATTER INSURED
This policy is recommended for the following instruments:
Electronic data processing equipment comprising central processor with flexible
programmability.
Peripheral equipments such as readers, printers, tape or card punchers or sorters.
Tapes, and discs.
Auxiliary equipment such as air conditioning, heating and power conversion or main
power control plant.
Electronic office equipments, material testing and research equipment.
Electro medical installations.
Telecommunication equipment, etc.
Computerized numerical control system used in connection with production
machinery.
INSURED PARTIES
The insured can be either the owner or the hirer of the electronic equipment. The
insurance protects, on the basis of the insurance conditions.
The Owner
As operator against material damage, for which the manufacturer is not responsible
under a guarantee.
The Hirer
Against material damage for which, he is responsible either legally or through a
leasing agreement.
 GENERAL EXCLUSIONS

Inherent Vice
Wear & tear, loss due to defects known to the insured at the time of
commencement of the policy. Manufacturers responsibility:
The loss / damage for which the suppliers are responsible under
guarantee.
Willful Act
Due to any willful act or willful negligence of the insured or his
representatives.
Cessation
Cessation of work whether total or partial.
Expected Perils
War, invasion and the like, nuclear reaction / radiation, loss or damage
due to interruption caused by the failure of any gas, water or electricity
service or supply.
Functional Failure
Maintenance costs.
Hired Equipments
For the equipment hired for which the owner is responsible.
Process of Insurance
Thank You