What is engineering insurance
Electronic Equipment Insurance
The term Electronic Equipment (EE), in the context of this branch of Engineering Insurance, comprises of all electrical system which generally have only a low current. There is a very wide range of such equipments such Computers, Micro Processors, Word Processors, Telecommunication Equipments, Machines meant for Medical and Ophthalmic use, Aviation Equipments, T.V. Studio Equipments, Process Control Equipments, Equipments for Computer/ Numerical control of machine tools and special purpose machines, etc. The electronics first appeared in the industry in the 50’s. Transition from mechanical and electrical monitoring and control to electronics has been accelerating at a breath- taking pace. Now there is hardly any field of technology or industry which is not touched electronics. EE insurance is therefore, of immense importance to the users of electronic equipments, may they be the owners, operators, maintainers.
SCOPE OF COVER:The E.E. Insurance is a “Comprehensive Accident” Insurance covering unforeseen loses which arise suddenly and cause material damage to the equipment from any of the following perils:-
- Location perils: Fire, Lightning, Explosion, Theft, Burglary and House Breaking.
- Operational Risks: Electrical/ Mechanical Breakdown, Faulty Design, Faulty Material, Faults in manufacturing assembling, erection, Moisture and humidity.
- Risks of Human Element: Faulty/ Careless/ negligent operation, Riot, Strike and Malicious damage.
- Acts of God Risks: Storm, Tempest, Hurricane, Flood, Inundation, Subsidence, Landslide, Rock slide, Earthquake.
The insurance cover is, however, subject to a few exclusions listed in the policy which are applied internationally and are common to the insurance industry.
Apart from the Material damage to the insured equipment, scope of cover available under an EE policy may be extended to cover the following on specific request:-
Data Media Insurance:
Cover may be obtained for financial loss that may arise from accidental loss of information data stored on the external data media such as diskettes and floppies. Cover is provided on a First Loss basis both for the materials value of the data media and the cost of reprocessing and restoring lost information.
Increased Cost of Working Insurance:
In the event of a breakdown of the insured computer, the required computing capacity may have to be hired from other sources. Cover may be obtained for reimbursement of these additional expenses involved such as hire charges, transportation cost etc.
Machinery Breakdown Insurance
INTRODUCTION:This Branch of Engineering Insurance has been developed to grant the Industry an effective insurance cover for Plant, Machinery and other mechanical equipment. It is an extremely useful Policy for protecting the Plant and Machinery against operational accidental damages. It even insures the machines against damage while these are idling and/ or under repairs, due to such non-operational causes as external impact, etc. The insured is permitted to select the machinery to be insured under the Policy, but has to offer a complete machine for insurance and not opt only for vulnerable parts. Such items having a short service life listed here under compared to the entire plant are however, normally excluded:-
- All types of interchangeable tools.
- Sieves, engraved, cylinders, stamps, dies, ropes, chains, belts.
- Parts made of glass, ceramic or wood, rubber tyres.
- Operating media of any kind such as fuel, gas, refrigerant, catalysts, lubricant (oil in transformers and circuit breakers is, however, included since it is not only a coolant but also serves as an insulation agent).
It is advisable to make distinction between plant and Machinery and Electronic equipment such as computers, microprocessor based controls and large process control instrumentation and systems which are predominantly electronic in nature. It is more economical and beneficial for the insured to get coverage for such equipment under Electronic Equipment policy instead of insuring it under Machinery Insurance policy. This policy is available only after the newly installed equipment has been successfully commissioned and has proved its operational/ productive worthiness.
SCOPE OF COVER:Machinery Insurance is an ‘Accident’ cover for machinery supplementing the coverage offered by a Fire Insurance Policy. It basically covers unforeseen and sudden physical loss of or damage to the insured items.\, necessitating their replacement or repair mainly arising from any of the following causes:-
- Faulty design, faulty workmanship, defects in casting and material
- Faulty operation, lack of skill, negligence
- Tearing apart on account of centrifugal forces.
- Short circuit and other electrical causes.
- Damage due to accident to boiler and its allied equipment due to shortage of water/ overheating and collapse of tube/ Flue gas explosion. The insurance cover is, however subject to a few exclusions listed in the policy which are applied internationally and are common to the insurance industry.
The Scope of cover under a Machinery Insurance Policy may be extended to cover the following on specific request.
ADDITIONAL CUSTOM DUTY COVER:
As custom duty payable on Project Equipment import is less that the duty applicable on replacement equipment/ Spares, it is advisable to have this extension which takes care of additional duty payable for replacement of equipment and/ or spares in the event of loss. The sum insured under the policy should be taken, based on estimated extra custom spares following a serious breakdown. This cover is operated on First Loss basis and actual custom duty is reimbursable subject to limits of amount.
Erection All Risks Insurance
In the course of execution of a project for erection of machinery, plant and structure of any kind, certain serious mishaps could occur resulting in loss or damage, as well as liabilities could arise in respect of Third Party claims for property damage or bodily injuries. An Erection All Risks(EAR) insurance offers protection to Principals and Contractors and also to manufacturers and Suppliers erecting machinery and plant etc, against financial loss due to any sudden unforeseen causes resulting in loss or damage to the property insured at the project site whilst being stored, erected, rested and maintained. EAR insurance has been designed to meet the tested and maintained. EAR insurance has been designed to meet the needs of the market, which are fast changing with the advancement in technology and the cover is available for structures and projects of all sizes of Macro or Micro levels i.e. large projects such as erection of Thermal Power Stations, Oil Refineries, Fertilizer plants etc, or small projects like installation of Computers or Electrical equipment.
SCOPE OF COVER: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 and till the test run is over and during maintenance, if covered. It covers all physical losses or damages arising from:-
- Location Risks: Fire, Lightning, Theft, Burglary and House Breaking.
- Handling Risks: Impact from falling objects, Collision, Failure of Cranes, etc.
- Testing and Commissioning Risks: Failure of Safety devices, Leakage of Electricity, Insulation failure, Short Circuit, Explosion.
- Risks of Human Element: Carelessness, Negligence, Fault in Erection, Strike and Riot, Malicious damage.
- Acts of God Risks: Storm, Tempest, Hurricane, Flood, Inundation, Subsidence, Landslide, Rockslide, Earthquake.
The insurance cover is subject to a few exclusions listed in the Policy which are applied internationally and are common to the insurance industry.
The scope of cover available under a standard EAR policy may be extended to cover the following on specific request:-Civil Engineering Works:
- Permanent Civil Engineering Works.
- Temporary Civil Engineering Works.
It is preferable to insure the above items under Contractors. All Risks Policy instead of this Policy. However, machinery foundations, specific supports of equipment etc, which must go as part of the machinery and requires to be constructed under supervision and guidance of Engineers of the suppliers of equipments could be insured under the EAR Policy.
Removal of Debris:
Major accidents or catastrophes cause devastating damages. The site may become unworkable and warrant clearance of area for restarting the work. This requires considerable expenditure and at times specialized services of experts. Under this cover, the insured is reimbursed the actual amount of expenditure incurred towards debris removal of insured property subject to maximum limit of 50% of the project cost.
Construction Plant and Machinery:
Every project site requires certain material handling and construction equipments like Cranes, Hoists, Air Compressors, Welding Sets, etc. for carrying out various erection activities. The said equipment unless already covered under a separate Contractors Plant and Machinery (CPM) policy, could be covered under this head but it is subject to terms and conditions of the CPM Policy.
Express Freight, (other than Air Freight) Over Time, Sunday and Holiday wages: On account of occurrence of an insured peril, some times it becomes necessary to undertake the repair work on war footing and also to work on holidays. The spare parts may have to be obtained by express freight (excluding air freight). To take care of such expenditure, an estimated amount that would be incurred following a major accident should be taken as sum insured. Factors to be taken into account would be the type of machinery/ plant, distance of the source of procuration, nature of transport available, type of labor and their wage structure.
Air Freight Cover:
Specific coverage should be taken for Air Freight of items. This cover operates on First Loss basis and actual expenses are reimbursable subject to maximum amount chosen under this head.
Under this extension damages caused to the surrounding property, such as property, such as property located on site belonging to or held in trust, care, custody or control of the Insured, on account of accident due to erection work is covered. Insurance of surrounding property becomes relevant when renovation or expansion project is envisaged and the work is carried out in the vicinity of existing assets.
Third Party Liability:
Circumstances may arise when on account of mishaps in the works, loss or damage may be caused to third party property as well as bodily injury in which case a liability will arise on the part of the insured to make good the loss. Such a liability can be covered under the extension of the policy.
It is a known fact that world economy has been experiencing upward inflationary trend in the last four decades. This trend has jumped up considerably during the last decade owing to various known and unknown factors. Our country in particular has faced widespread escalation duri8ng the last twenty years. The prices have shot up more than 3 or 4 times particularly in respect of imported goods. Erection projects are normally for a long period and it is, therefore, advisable to provide for increase in the Prime Cost of the equipment due to escalation to ensure full protection by opting for an Escalation Clause.
In the event of a claim arising, the Escalation Clause under the Policy provides indemnity to the Insured for the actual replacement cost of damaged items subject to the condition that it is equal to but not less than the original Prime Cost plus the selected escalation taken by the Insured under the policy. It should be clearly understood that this extension does not provide automatic coverage for project over-run on account of price variation, modification etc. The maximum escalation permitted under the Policy is 50% of the Prime Cost.
Contractor's Risks Insurance
During the course of execution of projects relating to construction of buildings and civil engineering works, certain unforeseen accidents could occurs resulting in considerable financial loss to the contractors and /or the principals arising from damage toe the contract works, construction Plant and machinery as well as Third Part Claims. The Contractors All Risks (CAR) Insurance has been designed to protect the interests of the contractors/ principals against such losses.
Although a CAR Policy may be taken by the Principal or by the contractor, but usually, under the terms of the agreement between the contractor and Principal, it is obligatory on the part of the contractor to affect CAR insurance in their joint names before the commencement of the project.Building works:
- Buildings such as dwelling houses, Schools, Universities, Hospitals, Shopping centers, Hotels, Factories and Workshops.
- Multistoried and high rise buildings.
- Non-conventional buildings or modern designs or where construction is difficult due to large, heavy or cumbersome prefabricated units.
- Alterations and extensions of structural or non-structural buildings.
- Earthwork, Sewage, Drainage, Roads, Irrigation system, Flyovers, Canals, Silos, Water Reservoirs and the like.
- Hazardous structures such as Tunnels, Dams, Mines, Bridges and the like.
SCOPE OF COVER:The Policy covers loss or damage to the subject matter from any sudden unforeseen or accidental cause which is not specifically excluded under the Policy. Therefore it covers all physical losses or damages occurring during the period of insurance arising from:-
- Location Risks: Fire, Lightning, Theft, Burglary and House Breaking.
- Handling Risks: Impact from falling objects, Collision, Failure of material handling equipments.
- Risks of Human Element: Carelessness, Negligence, Faulty material and Construction, Riot, Strike, Malicious damage.
- Act of God Risks: Storm, Tempest, Hurricane, Flood, Inundation, Subsidence, Landslide, Rock slide, Earthquake.
This insurance cover is subject to a few exclusions listed in the Policy which are applied internationally and are common to the insurance industry. The cover attaches as from the commencement of work or after the materials required for the project have been unloaded at the site, and terminates when the completed structure or one completed part thereof is taken over or put into service. The insurer’s liability for construction machinery, plant and equipment commences from their unloading at the site and expires on their removal there form. In addition, on specific request, it is possible to extend the period of cover to include a maintenance period.
EXTENSIONS:The scope of cover available under a standard CAR Policy may be extended to cover the following on specific request:-
- Clearance and Removal of Debris.
- Construction Plant and Machinery
- Express Freight, Over-time, Sunday and Holiday Wages
- Surrounding Property
- Third Party Liability
- Maintenance Visits Cover
- Extended Maintenance Cover
The coverage provided under the above extensions are similar to those under EAR insurance.
Contractor's Machinery Insurance
The execution of almost all projects necessarily requires use of various types of plant and machinery. The nature and the type of equipment may differ according to the nature, type and location of a project and may even differ at different stages of the projects. Such equipment may comprise of Cranes, Compressors, Road-rollers, Vibrators, Welding Sets, Hydraulic Excavators and the like. Whilst it is possible to have the Contractor’s plant and Machinery covered under an EAR or CAR Policy at specific project sites, Contractor’s Plant and Machinery (CPM) Insurance has been designed to provide a cover on 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 the sites wherever the plant and machinery is in use and even while the same is lying at the contractor’s own premises. The insurers have, however, to be informed of the sites where the insured items are being used.The Scope of cover available under a standard CPM Policy may be extended to cover the following on specific request:-
- Clearance and Removal of Debris
- Surrounding Property
- Their Party Liability