Anything can go wrong while installing your business equipment or machinery. The accidents or damages caused to your machinery/equipment can incur a huge monetary loss for your business. An erection all risk policy will protect you from these monetary losses. Engineering firms, construction companies, and other companies that are required to install or erect plants, machinery, and equipment on a frequent basis can get the erection all risks insurance policy.
What is Erection All Risk Insurance policy?
Erection all risk insurance plan aka EAR is a type of commercial insurance policy that covers the losses incurred during installing or erecting any equipment or machinery. It insures the machinery or equipment right from when it is loaded to be dispatched to the site till it gets completely installed. It also provides coverage for the defects or inconsistencies found while testing the machinery. If the machinery or equipment breaks down while being commissioned, the damages are also covered by this policy. If there are any free materials issued with the machinery, they are also covered by this policy if the insured has included them in the declared values.
Why is Erection All Risks Insurance Policy Required?
Industrial accidents resulting in damage to project installations and property are quite common these days. The heavy machinery or equipment stands at risk of being damaged while in transit. These machines may also suffer damages due to faulty installation or improper testing. The factory installation costs often run in the millions due to the frequent installation or erection of different types of production plants, projects, and machinery.
To counter the losses incurred during the erection or deployment of the machinery, most companies like to get an erection all risk policy. A comprehensive erection all risk insurance policy also includes a third-party liability cover. It provides coverage for the bodily injuries and property damages suffered by a third party during installation. The incidents while testing or erecting the machinery can often lead to fatal injuries. To protect the employees or any other third party from such incidents, industries can get this policy. Loss to public property while installing the machinery is also covered by an erection all-risks insurance policy.
The installations can also be damaged due to natural calamities like cyclones, landslides, floods, earthquakes, etc. They are also exposed to risks due to man-made disasters like riots, strikes, thefts, etc. An erection risk policy covers all man-made and natural disasters. It also provides protection from fire, explosion, and allied perils.
Key Features of Erection All Risk Insurance Policy
- Physical damages are covered: Machinery or equipment that are sensitive often sustain physical damages during installation. The material damages or losses caused during the installation process are covered by an erection all risks insurance policy.
- Testing & maintenance cover: The testing period refers to the period in which the installations are tested before the contractors hand them over to their respective owners. Any flaws or defects in the installation can be highlighted during this period. Therefore, it is a crucial period that determines whether the installation was successful or not. The erection all risk policy also covers the period for which the installation was under testing. It also covers the expenses caused due to maintenance works carried out to modify or repair the installed machinery or equipment.
- Comprehensive cover for erections: Companies usually erect new facilities for their ongoing or new projects. They may also dismantle the facility to create newer ones. The expansion of projects may also need them to erect plants and facilities. All these processes involve a lot of risks as the machinery or equipment may get damaged during erecting and dismantling processes. An erection risk policy covers all these risks and protects the company owners from the potential financial burnt.
- Wide coverage for stakeholders: A comprehensive erection all risk insurance policy may include coverage for manufacturers, suppliers, contractors, subcontractors, and other stakeholders related to the installation or erection of the machinery. The cover starts from the time when the machinery is deployed to the site and ends when it is finally handed over to the owner. It includes the period during which the machinery is tested.
- Cover for human errors & disasters: Many types of man-made and natural disasters are covered under this policy. It also includes coverage for unintentional damages caused due to human errors.
Characteristics of Erection All Risk Policy
- Policy premium: The erection risk insurance policy premium calculator calculates the policy premium by considering factors like the extent of coverage, sum insured, and location of the insured property. Most insurers allow you to pay the premium in installments if the policy period is longer than 12 months.
- Add-on covers: Add-on covers can be availed along with the erection risk policy to extend the benefits of the existing cover. The add-on covers for defective designs, debris removal, extended maintenance or testing period, escalations, etc. are also available.
- Legal liability cover: The legal liability cover is included by default in an erection all risks insurance policy. For instance, if the vehicle of a passenger gets damaged due to the machinery in transit, it is covered under the legal liability coverage offered by the erection risk policy.
Types of Erection All Risks Insurance Policy
- Liability-only policy: This type of erection risk policy only covers the legal liabilities claimed by the third party. It can also be included in the regular erection risk policy by paying an additional premium.
- EAR with cross liability: In this type of erection all risk coverage includes material damage and third-party liability cover. The third-party liability cover is accompanied by cross-liability which ensures that multiple parties are covered under the same policy. Therefore, it provides coverage to both parties if one raises a claim against the other.
- CEAR: CEAR i.e. Construction and Erection All Risks Insurance Policy provides comprehensive coverage for construction companies for the damages that are caused during an ongoing project. It also includes the benefits of an erection all risk insurance plan.
Erection All Risk Insurance Plans Available in India
| Policy Name | Sum Insured | Policy Tenure | Key Features |
| Erection All Risk Insurance by TATA AIG | As per the installation type and coverage requirements | From the commencement till the completion of the installation period as stipulated by the insured | 1. Provides complete coverage for plant and machinery construction risks. 2. Policy coverage can be extended to third-party by paying an additional premium. 3. Add-on covers can be included to cover surrounding property, debris removal costs, additional custom duty, and more. 4. Extended maintenance cover can be availed to extend the policy coverage during the maintenance period. |
| Erection All Risk Insurance Policy by Reliance General Insurance | As per the installation type and coverage requirements | From the commencement till the completion of the installation period as stipulated by the insured | 1. Coverage for both material damage and third-party liability is offered by this comprehensive erection risk policy. 2. Add-ons can be added to include coverage for design defects, additional custom duty, debris removal, and more. 3. Option to pay the premium in instalments if the policy period extends 12 months. 4. Covers the damage due to both natural and man-made disasters. |
| Erection All Risk Insurance Policy Online by ICICI Lombard | As per the installation type and coverage requirements | From the commencement till the completion of the installation period as stipulated by the insured | 1. Location risks such as lightning, thefts, explosions, housebreaking, and burglary are included in the erection all risk coverage. 2. Includes coverage for testing and commission risks. 3. Provides coverage for natural disasters. 4. Easy claim settlement process with simple documentation. |
| Erection All Risk Insurance by HDFC ERGO | As per the installation type and coverage requirements | From the commencement till the completion of the installation period as stipulated by the insured | 1. Erection all risk coverage includes protection for storage, erection, testing and commissioning of facilities, machines, and existing projects. 2. The policy coverage can be extended to cover the manufacturers, suppliers, contractors, and subcontractors. 3. Extensions to cover the terrorism, cross-liability, escalation, acts of terrorism, earthquake, etc. can be availed by the policyholder. 4. Sum insured includes the entire value of the plant and machinery erected/assembled. |
| Erection All Risks Insurance by Edelweiss Insurance | As per the installation type and coverage requirements | From the commencement till the completion of the installation period as stipulated by the insured | 1. Erection all risk coverage includes protection against material damage, surrounding property, construction plant and machinery, third-party liability, etc. 2. The option of extending the maintenance cover is provided by this policy. 3. Coverage for debris removal, cross-liability, loss minimization expenses, etc. can be availed by the insured. |
Inclusions & Exclusions for Erection Risk Policy
What’s covered?
- Protection for equipment, plant, machinery, and other onsite material work is included in the erection of all risk coverage.
- It covers perils like explosion, burglary, lightning, fire, and natural catastrophes like floods, earthquakes, cyclones, etc.
- Third-party liability protection provides coverage for third-party damages and bodily injuries caused due to the erection of insured property.
- The losses or damage caused due to poor storage of handling of equipment is included in the cover. The damages caused during maintenance or repair work during the test period are covered under this policy.
- Material damage cover is an add-on that provides coverage for excess custom duty, freight charges, escalation, and other related expenses. A comprehensive erection all risk coverage may include a material damage cover by default.
- The damages sustained by the equipment or machinery during commission are also covered under the erection all risk policy.
What’s not covered?
- Damages caused due to intentional or dishonest acts are not covered under erection all risks insurance policy.
- Losses or damages caused due to gradual wear and tear, corrosion, nuclear reactions, radioactive elements, and other nuclear perils are not covered under this policy.
- Erection all risk coverage does not include losses due to work interruption, manufacturing issues, and inadequate inventory.
- Damages caused due to poor artistry, faulty materials, and other deliberate acts during installation are also not covered.
- Some erection risk policies may not include coverage for the employees and their family members or employees of another firm. It is so because the workers are directly insured under group insurance schemes and other employees are covered by a public liability cover.
- Penalties of legal liabilities filed by a third-party due to not fulfilling contractual obligations like failing to deliver a project on date are not covered by this policy.
- Erection all risk insurance coverage does not include the damages caused due to vehicles in transit. It does not provide coverage for accidents caused by road, air, and water-borne vehicles.
- Errors resulting in damage or losses of non-physical nature are also not covered by this policy.
- Aesthetic defects in the installations like scratched paint surfaces, damage to glass materials, etc. are not covered under an erection risk insurance plan.
- Modifications, repairs, and restorations conducted after raising the claim are also not covered.
Who needs an Erection All Risk Policy?
The employers or company owners who install or erect machinery/equipment on a regular basis in their factories or plants should get an erection risk policy. The suppliers and manufacturers of the machinery can also get this insurance because it protects them from the losses incurred due to damages inflicted in transit. If there is any manufacturing defect in the installed equipment, it is also covered by this policy.
Contractors who are responsible for installing the machinery may also get it to protect themselves from the expenses incurred due to faulty installation of heavy machinery or equipment. The subcontractors who are assigned with a particular task/tasks related to the installation can also get this policy.
Things to consider while getting an erection risk policy
- Scope of coverage: Ensure that the erection risk insurance policy you get comes with a wide scope of coverage. A comprehensive erection all risk insurance coverage provides protection from damage or losses resulting from acts of god, testing and commission risks, handling risks, and location risks.
- Additional coverage: It makes sense to get more coverage by paying an additional premium. The optional extensions to cover air freight damages, escalations, additional customs duty, cross liability with third-party cover, etc. can be included by paying an additional premium. An erection all-risk insurance premium calculator will help you to calculate the exact premium after the inclusion of add-on covers. Use this calculator and decide whether the premium you are paying is actually worth paying for.
- Online support: An erection risk insurance plan that comes with online support and a complaint redressal platform can be helpful in most cases. You can seek advice from the support team immediately after an incident and proceed with the claim settlement process accordingly. It not only saves your time but also helps you to get the insurance without any hassles. Therefore, before getting the policy, ensure that the insurer provides this facility.
- Comparison: You must compare multiple erection risk policies before choosing one. It will help you get the best erection risk insurance plans in the market. It will also help you understand the different types of erection risk policies that are available in the market. By going through their details properly, you can choose the one that suits the types of projects you work on.
How to claim an erection risk policy?
The following steps will guide you while claiming for an erection all risk coverage:
Step 1: Contact the insurer immediately after an incident
You should contact the insurer immediately after an incident. The nature of the incident, the possible damages inflicted to a third-party, physical damages inflicted on the equipment or machinery, and other details should be provided to the insurer. After that, you should seek their advice regarding the claim process.
Step 2: Submit the claim form and documents
After hearing your case, the insurer will seek information about your policy such as policy holder name and policy number. After furnishing these details, the insurer will ask you to fill and submit a claim form. The details regarding the incident should be correctly filled in the form.
The supporting documents like photographs of the damage, FIR copy (in case of thefts or burglary), etc. should be submitted. It will help the insurer to verify your claim and issue reimbursements as soon as possible. Do not forget to note down the claim registration number as it will help you to track the status of the claim in the future.
Step 3: Appointment of the surveyor
Once your application is screened, the insurer will appoint a surveyor to validate your claims. The surveyor will inspect the machinery or third-party damages by visiting the on site location. After examining the evidence and site, the surveyor will create a detailed report. The report will also include the estimation of the financial losses incurred due to the incident.
Step 4: Claim settlement process
The surveyor will submit the report to the insurer. The insurer will initiate the claim settlement process shortly after this step. You should be patient and cooperate fully with the insurer during this period.
Documents to be submitted along with the claim form
The following documents can be submitted to support your erection all risk insurance claims:
- Duly filled claim form
- Photographs of the damage/incident
- Copy of the FIR in case of thefts, vandalism, riots, and burglary
- Details of the witnesses like name, address, mobile number, etc.
- Details of the property owner (in case of third-party damage)
- Information regarding the commencement date of testing (if the damage has occurred during the testing period)