Machinery Breakdown Equipment Insurance

All items of plant and machinery are susceptible to breakdown or damage irrespective of their quality or the attention given to them by their owners.  With steady increase in the cost of parts, labour and freight charges, repairs and replacements are becoming more and more expensive day by day.

A modern factory may contain valuable machinery concentrated in a relatively small area.  An accident such as a disrupting machine or impact from an extraneous cause may very well result in an expensive loss involving several machines.

Even breakdown of individual items of machinery may produce very substantial losses. Breakdown repair costs may run into several lakhs of rupees.  Accidents under machinery insurance policies occur more frequently than under Fire or Boiler Explosion insurances.

What’s covered

The Insurance Policy protects all machineries or equipment against unforeseen or sudden accidental physical loss or damage caused by:

  • Acts of carelessness.
  • Any short circuits, disruptions, or electrical overpressure.
  • Failure of operation of safety devices.
  • Structural defects, or material defects, or defects of assembly.
  • Loosening of parts, or abnormal stresses, or centrifugal force; or excessive speed, or fatigue.
  • Defective or accidental lack of lubrication, seizure, water hammer, or local overheating.
  • Unexpected working accidents like vibration or maladjustment.
  • Any occurrences that takes place due to collision, or impact, or falling, or such like incidents.
  • Any kind of obstructions or entry of foreign bodies

In addition to the above, the policy also covers the machinery foundations, 

All of the above are subject to main exceptions, which are commonly insured like fire and allied perils; or which are uninsurable like wear and tear.

What’s not covered

The insurance policy does not cover:

  • Loss or damage that arises due to overload experiments or tests requiring imposition of abnormal conditions.
  • Loss or damage for which the manufacturer or supplier is responsible, either by law or contract.
  • Faults or defects that exist at the time of start of insurance, known to the insured or responsible representative, but not disclosed to the insurer.
  • Wilful acts or negligence of the insured.
  • Fire and allied perils, thefts, etc.
  • Flaws that are gradually developing, or wear and tear, failure of preventive maintenance.
  • Pre-existing faults or defects in the machinery before the commencement of the policy.
  • Defects, or cracks, and such like cases, in any form, ignored regularly despite being aware that they need repair.
  • Damage to belts, chains, ropes, or any other unchangeable tools, unless any loss or damage to the machinery is indemnifiable.
  • Loss or damage caused by explosions in chemical recovery boilers.
    Wars, Civil Wars, Riots, & Strikes.

When The Insurance Is Covered?

When the machines are:

  • Working or are at rest
  • Getting dismantled for the purpose of clearing, cleaning, or overhauling, when being shifted within the premises, during subsequent erection

What Machines Can Be Insured?

The following types of machinery come under the insurance policy:

  • Process Machinery in industries like engineering and metallurgical, or cold storage, or paper/pulp making, or printing, or rubber/plastics, or textiles.
  • Mechanical plants including engines; turbines – steam, water, and gas-; compressors; blowers; pumps; machine tools; presses; and refrigerators.
  • All Electrical Equipment, including motors, rectifiers, switchgear, transformers, and alternators and generators.
  • Overhead cranes, lathes and all kinds of machines used in production in various factories

Who Is Eligible For The Insurance?

Those applying for the policy must be an:

  • Owner.
  • Organization that leases the equipment.
  • Bankers or financiers who have lien on the machinery.

Claim Process

The claims process for machinery breakdown insurance varies from company to company. However, there are certain general steps that need to be taken to initiate the claim.

For this, the insured must:

  • Take all appropriate steps to minimize the extent of loss or damage.
  • Preserve all the damage or defective parts in the machinery for an inspection or survey by an independent surveyor or an insurance official.
  • Furnish a copy of the estimate of repairs from the authorised repairer.
  • Provide necessary assistance and extend all support in the claim investigation process.
  • Submit extract of asset register / bills from the repairer, proof of payment to the repairer after the repairs are complete etc.
  • Submit all other requisite documents viz., photographs, logbook extract, maintenance register, copy of AMC and other information as sought by the insurance company/surveyor.