Engineering Insurance Explained: Types, Coverage & Why It Matters

Did you know that boiler explosion coverage which is a part of engineering insurance dates back to the 19^th century? The concept of insuring boilers and pressure plants started in the 1800s after frequent industrial explosions. If you think engineering insurance is limited to construction, you are wrong. It covers a project from its design phase, through construction and installation, to final operation.

Read this guide to understand what engineering insurance is and what are the types of engineering insurance. Explore engineering insurance from Bajaj General Insurance and protect your project right from the inception till completion.

What Is Engineering Insurance?

Imagine you run a construction company. One day, due to some fault, the entire structure collapses, destroying nearby property. You will be held liable and may have to face huge financial losses as a result of legal lawsuits. Engineering insurance protects you in such scenarios.

So, what is engineering insurance? Engineering insurance is a type of commercial insurance that protects construction and industrial projects from risks like machinery or construction damage, a technical fault or equipment breakdown, and also covers worker injuries and third-party liabilities. It provides financial support when construction companies face losses due to the occurrence of the above risks.

But engineering insurance is not only for construction companies; industries that use heavy machinery and equipment can also benefit by purchasing this insurance.

Thus, engineering insurance covers projects from losses, accidents, and natural disasters from the time such projects start till the time they are completed.

What Is Covered and What Is Not?

Engineering insurance provides protection against physical damage to the project due to the occurrence of natural calamities, theft, machinery damage, or faulty erection. Also, third-party liabilities are covered. Some policies also provide compensation against business interruptions. This ensures that businesses are not affected and continue to work smoothly.

However, this insurance does not cover normal wear and tear or loss incurred as a result of some illegal activity. Also, if the owner has neglected to follow some safety rules or deliberately damages some part of the project, such activities are not covered. Additionally, damage due to war or nuclear activity and manufacturing defects or poor workmanship if not disclosed are excluded.

Why Engineering Insurance Matters?

If the project stalls due to some incident, stakeholders face huge losses. Engineering insurance is essential because:

●       Provides comprehensive protection: It provides protection against various types of risks that could prevent the project from getting completed.

●       Financial risk is mitigated: If the project does not complete within the stipulated time, there is a risk that stakeholders suffer huge loss.

●       The project work continues: It helps in the repairs and replacements and the work continues without interruption.

●       Covers third-party liability: This insurance protects against third-party claims.

●       Provides peace of mind: Developers, contractors, and financiers can stay confident that their project work will be carried out without hassles or interruption.

Engineering insurance is important for various sectors, such as:

●        Infrastructure developers who work on projects like roads, airports, tunnels, and bridges.

●        Real estate builders who handle residential or commercial construction projects.

●        Contractors involved in civil, electrical, mechanical, or industrial work.

●        Manufacturing industries that depend on heavy machinery and automated systems.

●        Power and energy projects such as wind farms, solar plants, and thermal power stations.

●        Government projects that include public infrastructure and utility contracts.

What Are the Types of Engineering Insurance?

Following are the types of engineering insurance:

1.     Erection All Risk (EAR) Insurance

This insurance is useful for large projects like power plants, refineries, or bridges where a lot of mechanical installation is needed. Such projects can suffer damage during the installation or erection stage. EAR insurance protects projects against fire, natural disasters, theft, etc. and covers third-party liability.

2.     Construction All Risk (CAR) Insurance

CAR insurance is made for civil construction projects. Examples are building houses, roads, office buildings, and towers. CAR insurance offers comprehensive coverage during the construction phase.

3.     Contractors’ Plant and Machinery (CPM) Insurance

This kind of insurance protects the heavy machinery that contractors or builders use, like cranes, excavators, bulldozers, concrete mixers, and piling rigs. This insurance is very important when you have expensive equipment that is used extensively or moved between sites.

4.     Civil Engineering Completed Risk (CECR) Insurance

Even after the construction of highways, tunnels, ports, bridges, etc. is complete and handed over to the relevant authorities, these structures face risk. This insurance covers the structural damage that might happen after the project is completed.

5.     Boiler and Pressure Plant Insurance

Industrial units that use steam boilers or pressure vessels face the risk of explosion damage that may destruct nearby property. This insurance covers this risk.

6.     Machinery Breakdown Insurance

Manufacturing units and processing plants may suffer mechanical breakdowns and such an interruption may halt their work. If a machine fails unexpectedly, this policy covers repair or replacement costs.

Conclusion

Engineering insurance is a must-have for construction and industrial companies. This type of insurance covers many risks that could halt a project and make it difficult to reach the completion stage.

For more details on engineering insurance coverage, visit Bajaj General Insurance today and cover your projects from unexpected risks.

FAQs

1. What is engineering insurance?

Engineering insurance is a category of insurance that protects engineering and construction projects, machinery, and equipment from damages, technical failures, and legal liabilities.

2. What are the types of engineering insurance available in India?

The main types include Erection All Risk (EAR), Construction All Risk (CAR), Contractors' Plant and Machinery (CPM), Civil Engineering Completed Risk (CECR), Boiler and Pressure Plant Insurance, and Machinery Breakdown Insurance.

3. What does a CAR insurance policy cover?

CAR (Construction All Risk) insurance covers civil construction projects against damage from fire, natural calamities, theft, and third-party liabilities, along with worker injury during construction.

4. Why do contractors need CPM insurance?

CPM insurance protects valuable construction equipment from accidental damage, theft, or natural disasters, ensuring business continuity and asset safety.

5. Can I customise my engineering insurance policy?

Yes, most insurers offer customisable engineering insurance with add-ons such as debris removal, escalation clauses, and professional indemnity to fit your project’s needs.

6. Is professional negligence covered under engineering insurance?

Some engineering insurance plans include professional indemnity as an add-on, which covers errors in design or consultancy that result in project loss or delay.

*Standard T&C apply

**Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

***Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.