How to Protect Construction Equipment and Projects With Engineering Insurance

Construction sites are prone to many mishaps and incidents. A minor accident at a worksite can lead to damage of expensive equipment, delay a project and incur unanticipated expenses. For construction companies, contractors, builders, and infrastructure developers, Engineering Insurance presents a viable risk management option. Engineering insurance in India helps protect construction equipment, machinery, and projects from eligible losses due to accidents, fire, breakdown of equipment, and some natural events. This blog throws light on engineering insurance, its types, and how to choose an appropriate coverage option for your construction business.

What Is Engineering Insurance?

Engineering Insurance is a type of insurance that covers construction projects, plant and machinery, and related business interests from eligible losses. Based on the policy, this insurance covers damage to equipment, machinery breakdown, some natural events, and eligible third-party claims.

In short, engineering insurance helps finance the eligible damage to construction equipment and machinery. Every insurance policy comes with exclusions and conditions, and engineering insurance also has its own terms and conditions. So, what is the difference between an engineering insurance policy and other insurance policies? There is no set rule to what engineering insurance covers and what it doesn’t. There are various construction insurance policies, and each covers different aspects of the project.

Following are some of the insurance policies that construction businesses in India purchase to cover their equipment and projects:

·         Contractors All Risk Insurance

·         Construction Equipment Insurance

·         Plant and Machinery Insurance

·         Heavy Equipment Insurance

·         Erection All Risks Insurance

·         Machinery Breakdown Insurance

Common Risks Faced by Construction Businesses

Following are some of the common risks faced by construction businesses during the progress of a project.

·         Accidental damage to equipment

·         Fire, flood, and other natural events

·         Damage to equipment at a construction site

·         Unplanned incidents at a construction site

·         Eligible third-party damage to property or bodily injury

·         Financial losses due to project delay due to an insured event

Note: It is essential to understand that not all of the above risks are covered under an engineering insurance policy. The coverage depends on the policy, as each insurance policy has its own set of terms, conditions, and exclusions. For instance, while damage to an excavator due to an accident is covered under most of the engineering insurance policies, gradual damage is not eligible for claim settlement.

Engineering Insurance Policies for Construction Projects

There are various policies that together constitute engineering insurance for construction projects. Some of the policies and their coverage are discussed below.

Contractors All Risk Insurance

Contractors All Risk insurance is a cover for construction projects, which includes works, materials, and some third-party liabilities. It is primarily used for building projects, roads, and infrastructure development projects.

Construction Equipment Insurance

This insurance is for construction equipment, such as excavators, cranes, concrete mixers, and bulldozers. It offers protection from accidental damage, theft, and other perils.

Plant and Machinery Insurance

This insurance covers machinery and plant used in construction and other industries. It covers fire, floods, and other events that may damage the machinery.

Heavy Equipment Insurance

This is a type of construction equipment insurance that covers cranes, bulldozers, and other heavy machinery.

Erection All Risks Insurance

This insurance covers machinery and plants during erection, commissioning, and testing.

Machinery Breakdown Insurance

This is another type of insurance that covers machinery and equipment. In this policy, breakdowns due to electrical and mechanical problems are covered. However, damage due to fire and other natural events is not covered.

Why are there so many insurance policies? What is the relevance of having multiple engineering policies to cover works or equipment damage? Each of the above-mentioned policies covers specific equipment and has a unique set of terms and conditions. It is possible that a single policy may not cover all the equipment that is required for a project.

Impact of Engineering Insurance Policy on Equipment and Projects

Engineering insurance in India covers eligible financial losses due to accidents, such as damage to construction equipment and machinery. The coverage provided by the policy will determine the eligible and ineligible incidents. Let’s try to understand it with the help of an example.

Example 1: A crane is damaged due to an incident at a project site. The financial impact of this incident will depend on the insurance policy. A crane may cost several crores of rupees. If the crane sustains damage due to an incident, the financial loss will depend on the insured amount, the sum insured, and other terms and conditions of the policy.

Let’s suppose, a contractor has purchased a construction equipment insurance policy that covers the excavator. While excavating the road construction project, the excavator sustains damage. It will now incur repair costs. If the excavator sustains damage due to an incident, the financial loss will depend on the policy. If the policy has a deductible, the contractor will have to bear the deductible amount. If the damage to excavator incurs project delay, the contractor may have to bear the loss due to project delay. Thus, it is imperative to understand the policy terms and conditions before purchasing the policy.

Example 2: A mixer is damaged due to malfunction. A machinery breakdown insurance policy can cover this incident. Suppose a crane sustains damage due to a covered natural event. The applicable policy covers this incident, and thus, the damage to the crane will be eligible for claim settlement.

Engineering insurance policy is an effective way to cover financial losses due to damage to construction equipment, machinery, and projects.

How to Choose the Right Engineering Insurance Policy?

Choosing an appropriate insurance policy is a critical decision. It depends on various factors, such as the nature of the project, equipment, and location of the project. Following are some of the pointers that can help in selecting the right engineering insurance policy.

·         List of equipment, plants, and machinery that need to be covered under the policy

·         Location and duration of the project

·         Coverage provided and sum insured

·         Terms and conditions of the policy, such as deductible

·         Understanding of third-party covers and other covers provided in the policy

·         Compare different types of insurance policies and choose the one that covers the project and equipment.

Why do Construction Businesses Need Engineering Insurance?

Infrastructure development and building construction are critical aspects of economic growth. With economic growth, the infrastructure and construction industry is witnessing an upsurge. With an increase in infrastructure and construction projects, the number of accidents and incidents at the construction site has also increased. This, in turn, has increased the demand for insurance policies. Engineering insurance presents an option for construction companies, contractors, and infrastructure developers to cover financial losses due to eligible events. The coverage of the policy varies depending on the nature of the project, type of equipment, and location of the project. In some cases, a project-specific insurance may be required. Hence, it is essential to review the terms and conditions of the contract and legal requirements before purchasing the insurance policy.

Engineering Insurance for Construction Projects in India

Insurance policies can be complex and challenging to comprehend. An insurance broker can help in navigating the intricacies of the insurance policy. When looking for an engineering insurance policy, construction businesses can rely on the expertise of RiskBirbal Insurance Brokers, which helps in exploring options and covers worksite, equipment, and machinery.

RiskBirbal Insurance Brokers helps businesses in understanding the difference between insurance policies and explores the options available to the businesses. Help in evaluating the scope of coverage, exclusions, terms, and conditions of the insurance policy. And provide insight into the engineering insurance cover that suits the business needs. We believe in guiding the clients in making informed decisions about their worksite needs.

RiskBirbal Insurance Brokers is an insurance broker and not an insurer. Therefore, we do not guarantee claim approval, premium rates, and coverage. We help our valued clients in making well-informed decisions while purchasing the engineering insurance.

Conclusion

Engineering insurance helps in covering financial losses due to damage to construction projects, equipment, and machinery. With an increase in infrastructure and construction projects in India, construction companies face a significant risk of incurring financial losses due to mishaps at the construction site. While some of the mishaps or incidents at the site are unavoidable, businesses can purchase an engineering insurance policy to cover financial losses due to these incidents.

Businesses in the infrastructure and construction industry should identify their risks and then evaluate the options available to them to purchase an appropriate insurance policy. RiskBirbal Insurance Brokers can help in navigating the options and complexities of the insurance policy. We can help in providing insight into the insurance policies based on the needs of the project and the business. We believe in guiding and assisting our clients in making informed decisions about engineering insurance policies in India.

Source: Medium

FAQs

What is engineering insurance for construction projects?

Engineering insurance for construction projects is a cover for damage to works, equipment, and machinery. It also covers some third-party claims.

What does Construction Equipment Insurance cover?

Construction Equipment Insurance covers accidental damage, theft, and other risks for construction equipment, such as excavators, cranes, and concrete mixers.

Is Contractors All Risk Insurance suitable for construction companies?

Contractors All Risk insurance is a cover for construction projects, works, and materials. It is ideal for contractors and builders.

Does engineering insurance cover heavy machinery damage?

Heavy Machinery Insurance and Construction Equipment Insurance covers damage to heavy machinery. Coverage depends on the terms and conditions of the policy.

What is the difference between Engineering Insurance and Plant and Machinery Insurance?

Engineering Insurance is an umbrella term that encompasses a range of policies. Plant and Machinery Insurance is a type of engineering insurance that covers plant and machinery.

How can construction companies choose the right Engineering Insurance Policy in India?

Construction companies can choose the right policy by identifying the equipment and machinery that need to be covered. They should also evaluate their project and location and compare different policy options.

Why should contractors consult an insurance broker for engineering insurance?

An insurance broker can help in selecting the right policy and coverage. An insurance broker also provides guidance in purchasing the insurance policy and during the claim settlement, subject to the terms and conditions.