Educational Knowledge GuideAligned with IRDAI Tariff & Engineering Standards

Engineering & Project Risk Insurance Guide

Understand how specialized engineering insurance protects construction projects, plant machinery, erection works, and electronic equipment against physical damage and operational breakdowns.

What is Engineering Risk Insurance?

इंजीनियरिंग और प्रोजेक्ट जोखिम बीमा क्या है?

Engineering insurance provides comprehensive protection for civil engineering projects, installation of plant machinery, and ongoing operation of mechanical or electronic assets. While standard fire policies cover external perils like fire and lightning, engineering insurance covers internal operational failure, erection mishaps, casting faults, electrical short-circuits, and civil construction hazards.

Key Principle: Protects high-value capital assets both during project execution (erection & construction) and throughout their active operational lifecycle.

Engineering Policy Categories

Categorized into non-renewable Project Policies for active construction and renewable Annual Policies for operational plant & machinery.

Contractors All Risk (CAR)

Civil Works

Covers civil construction projects (buildings, roads, bridges, dams) against earthquake, flood, collapse, and contractor negligence.

• Includes Third-Party Liability cover
• Covers materials stored at project site
• Extended testing & maintenance periods

Erection All Risk (EAR)

Plant Erection

Covers assembly and installation of heavy machinery, power plant equipment, and industrial structures during testing & commissioning.

• Covers cold & hot testing risks
• Insures against faulty workmanship
• Storage & inland transit extensions

Advance Loss of Profit (ALoP)

Financial Delay

Indemnifies project principal against lost gross profit and standing charges caused by delayed project completion due to a CAR/EAR physical loss.

• Covers debt service obligations
• Fixed standing operational charges
• Tied to CAR/EAR primary coverage

Who May Need Engineering Insurance?

Infrastructure Developers & Civil Contractors building highways, bridges, power plants, and commercial complexes.
Manufacturing & Industrial Units operating heavy CNC machines, boilers, turbines, and assembly lines.
IT Parks & Hospitals operating high-value server infrastructure, MRI machines, and precision electronics.
Equipment Rental Firms leasing mobile cranes, excavators, and generators to job sites.

Key Risks & Perils Addressed

Operational Breakdown: Mechanical failure, shaft snapping, electrical short-circuits, and voltage fluctuations.
Erection Accidents: Dropping of heavy turbines during hoisting, alignment errors, and testing failure.
Natural Calamities on Site: Inundation, landslides, earthquake, storm damage during civil construction.
Human Errors: Operator misjudgment, lack of skill, and accidental impact by site vehicles.

Typical Exclusions & What May Not Be Covered

Normal Wear & Tear: Gradual deterioration, rust, corrosion, boiler scale, or routine maintenance costs.

Willful Negligence: Intentional overload, operating equipment beyond rated OEM capacity, or unapproved alterations.

Pre-existing Defects: Faults existing prior to policy inception known to the insured but non-disclosed.

Consumables: Belts, ropes, rubber hoses, fuses, oil, and cutting tools subject to rapid replacement.

War & Nuclear Perils: Losses resulting from war, invasion, civil commotion, or nuclear contamination.

Contractual Penalties: Liquidated damages or penalties for delayed project completion (unless covered under ALoP).

How Engineering Insurance Premium is Calculated

There is no universal fixed price; premium is risk-rated based on underwriting factors.

1. Sum Insured

Must equal current New Replacement Value (NRV) of machinery or total project contract value.

2. Machine Age & OEM

Newer OEM machinery with active AMC contracts attracts favorable risk rating compared to older units.

3. Project Location

Seismic zone classification, flood history, and soil conditions impact construction project rates.

4. Deductible / Excess

Choosing a higher voluntary excess per claim reduces overall policy premium commitment.

Interactive Claim Document Checklist

Select documents you have ready for an engineering or machinery breakdown claim:

Original Policy Schedule & Endorsements

मूल पॉलिसी अनुसूची और एंडोर्समेंट

Principal Contract Agreement / Work Order

मुख्य अनुबंध समझौता / कार्य आदेश

Detailed Incident / Breakdown Report by Engineer

इंजीनियर द्वारा विस्तृत दुर्घटना / ब्रेकडाउन रिपोर्ट

OEM / Authorized Repairer Itemized Estimate

मूल उपकरण निर्माता (OEM) मरम्मत अनुमान

Machine Maintenance Log Book & Inspection Register

मशीन रखरखाव लॉग बुक और निरीक्षण रजिस्टर

Original Machinery Purchase Invoice & Asset Register

मूल मशीनरी खरीद चालान और संपत्ति रजिस्टर

FIR / Police Intimation (for Theft / Burglary / Malicious damage)

प्राथमिकी (FIR) / पुलिस रिपोर्ट (चोरी/नुकसान हेतु)

High-resolution Damage Photographs & Video Evidence

नुकसान की उच्च रिज़ॉल्यूशन तस्वीरें और वीडियो

Independent Surveyor Loss Assessment Report

स्वतंत्र सर्वेक्षक की हानि मूल्यांकन रिपोर्ट

Immediate Action Required: In case of machine breakdown or site mishap, stop machine operation immediately, notify insurer within statutory window, and preserve damaged components for surveyor inspection without unauthorized repairs.

Frequently Asked Questions

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