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What is Contractors Plant & Machinery Insurance?
Those in the construction industry make use of various heavy machinery and equipment for several contracts such as the construction of buildings, roads, bridges, factories, houses, etc. These machines are very expensive and if any physical loss or damage happens to such equipment then the contractor faces a high financial loss too. This also results in the business operations being compromised for an indefinite period.
Hence, a Contractor’s Plant & Machinery Insurance policy comes to the rescue here by providing financial reimbursement in case of any loss or damage to these assets which risks the financial well-being of the contractor.
Features and Benefits of Contractor’s Plant and Machinery Insurance
These are the vital features of the policy which make it a valuable investment for any contractor:
- This policy is primarily designed for covering a multitude of plants and machinery that are used on construction sites.
- This policy covers all the movable equipment and machines against the risk of damage or loss caused due to a mishap.
- Repair or replacement cost is paid for the machinery according to the extent of damage so that the work can be resumed as soon as possible.
- The sum assured under this policy is the replacement cost of every item with a new item of the same function, capacity, and size. However, freight charges, customs duty, cost of erection or setting up, etc. will be deducted from the sum insured when the machinery is replaced.
- The contractor also has an option of insuring only selected machinery as well.
- The premium for the policy will depend on factors such as the function of machinery, type of machinery, locations of operations, risks involved, etc.
- The duration of the policy is generally one year and you have to annually renew this policy to have its financial backing in the future.
Inclusions under Contractors Plant and Machinery Insurance
Given below are some of the major benefits of the policy, in which case the insurance company will provide you financial compensation for your loss:
- This policy will protect you against any unexpected accidental damage or physical loss caused to your plant and machinery.
- This policy covers all the movable machinery and equipment of the contractor like cranes, excavators, compressors, bulldozers, etc.
- The insurance cover will be valid whether the machinery is being used or at rest during the time of damage. If the machinery is dismantled for cleaning or overhauling and is subsequently re-erected, it will still be insured during the whole process.
Add-on Covers for Contractor’s Plant and Machinery Insurance
These rider covers can be taken by the contractor by paying an additional amount of premium:
- Express freight costs.
- Airfreight charges.
- Surrounding property of the owner.
- Clearing and removing the debris after physical damage or loss.
- Customs duty
- Third-party liability.
- Act of terrorism.
- Equipment mounted on a moving vessel/craft.
Exclusions under Contractors Plant and Machinery Insurance
If loss or damage of the plant and machinery takes place due to any of the following common exclusions, then compensation will not be provided:
- Mechanical, electrical, or electronic breakdown, failure, or breakage.
- Pre-existing faults, defects, or damages.
- Damages due to the explosion of a pressure vessel, boiler, or combustion engine.
- Abandonment of machinery working in tunnels or underground mines.
- Vehicles that are designed for ordinary use on open roads.
- Damages that are incurred when the plant or machinery is on a public road.
- Water-borne vessels and crafts.
- Machinery being deteriorated because of lack of use.
- Damage incurred due to immersion of machinery in tidal waves.
- War and warlike situations.
- Nuclear perils.
- Machinery and equipment other than tunnel boring machines being used underground.
- Damage occurs when the machinery is undergoing a test.
- Consequential loss.
- Terrorism damage, unless specifically covered.
- Damage for which the seller or manufacturer of the machinery is responsible.
- Gross negligence.
- The willful act of damage or misuse of machinery and equipment by the insured and insured’s representatives.
- Normal wear and tear, rust, corrosion, depreciation, etc.
- When the machinery falls under a contractual liability or manufacturer’s guarantee.
- Damage to exchangeable tools and parts like drills, bits, knives, saw, etc. which by default are more prone to wear and tear with use.
- Loss or damage discovered only at the time of taking an inventory by the insurance company.
- Any other exclusions that are given in the policy document.
Why is Contractors Plant and Machinery Insurance required?
Every contractor in the country is primarily dependent on their plant, machinery, and equipment for the operations of their construction business. Some contractors own their machinery and some hire them, but in both cases, they are responsible for any damage to the machinery. Hence, any physical loss or damage to machinery that is used for construction means a huge financial expenditure for the contractor to repair or replace it. This requires a great amount of investment which puts a financial burden on the contractor.
On the other hand, the investment required for a Contractor’s Plant and Machinery Insurance is minimal whereas its value is tremendous.
This will give peace of mind to the contractor that his assets and financials are safe and secure under this policy. Even in case of some mishap, the insurance company will take the complete responsibility to replace this asset with a new one at its current market value.
It doesn’t matter if the machines are being used, at rest, have been dismantled for cleaning or overhauling, or are being re-erected subsequently, the insurance cover will be applicable.
Both partial and total damages are covered under this policy for a variety of machines and equipment.
Therefore, it’s highly recommended that a contractor should take this policy to make sure that his business operations and financials are never interrupted.
Who can take Contractor’s Plant and Machinery Insurance?
Any of the below-mentioned parties can take a Contractor’s Insurance Policy either individually or jointly:
- The owner of the plant and machinery.
- The renter of the plant and machinery.
- Banks, financial institutions, and investors of the project.
- The contractor or user of the plant and machinery.