Engineering projects are complex, and complexity often brings risk. Consider investing in a comprehensive engineering insurance plan that protects against such risks and ensures smooth project execution and completion. This guide explores the world of engineering insurance, scope, and risk management strategies to ensure your project's success with minimum liabilities.
Let's learn about engineering insurance, inclusions and exclusions, and all that matters to keep your project on track!
Engineering insurance refers to a contract that provides comprehensive protection against financial risks associated with engineering projects related to machinery, equipment, labour, and other elements during construction and operation. Depending on the project type, it can cover financial loss or damage to construction projects, installation projects, computer equipment, and machinery and equipment.
The insurer offers financial coverage for physical loss or damage to machinery or equipment and safeguards the insured (contractor or employer)
Engineering insurance also shields against economic impacts due to property damages and/or physical injuries to third parties.
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Let’s explore standard inclusions and exclusions of engineering insurance in India.
Inclusions
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Fire and allied perils
Earthquake and shock
Collapse
Faults in construction
Storms, floods, cyclones, and tempests
Water damage
Negligence and human errors
Some insurers provide add-ons or additional coverage with an extra premium, including
Coverage for express freight and airfreight.
Overtime
Glass breakage
Additional customs duty
Cost of clearance and removal of debris
Storage at the fabricator’s premises/workshop
Construction equipment like shuttering and scaffolding materials
Cross-liability and third-party liability
Contractor’s plant and machinery
Maintenance visits cover and extended maintenance coverage for accidental loss or damage whilst conducting repairs during the maintenance period and/or any amount incurred to rectify original defects or faults during construction.
Terrorism-related impact on engineering projects
Damage or loss to the property surrounding the owner’s property which does not form part of the contract work
Exclusions
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Knowing the exclusions for engineering insurance helps with a hassle-free claim process. Here is the list of standard exclusions for your quick reference.
Perils related to war, arson, and mob attacks
Gradual deterioration and standard wear and tear
Financial loss or damage due to faulty design, defective materials, etc.
Inventory losses and wilful negligence
Loss of revenue, penalty due to delay in the project, and other consequential losses
Damage or loss to vehicles authorised for water transport or general road use.
Damage or loss to files, bills, currency, stamps, notes, security cheques, packing materials (such as boxes/crates/cases), accounts, drawings, and more
As the exclusions and inclusions vary between insurers, you must consult your insurer for specific coverage details. First-timers can browse various sites of insurers and aggregators to compare policies, insurers’ profiles, claim settlement ratios, etc., and pick a plan that suits your project requirements and budget.
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Let us go through crucial risk management strategies that can minimise risks associated with your engineering or construction projects.
Recognition of risks specific to situations, including operational, financial, or external factors that might influence project goals
Diversification minimises the impact of a single significant risk on the overall construction or engineering project. Engineering insurance with add-ons can provide a shield against multiple potential losses.
Invest your time in finding suitable insurance coverage to help recover losses due to unforeseen events during the project’s tenure.
Prepare a contingency plan for unforeseen events with suitable engineering insurance. Choose an insurer who responds promptly and efficiently.
Periodically review risk management strategies and keep your insurance policy updated. The risk landscape evolves with project stages and other factors; assessments help align projects with the intended goal.
Maintain financial reserves for emergencies to navigate through tough times without hampering projects and overall economic health.
Train employees in safety protocols and conduct sessions and mock drills to ensure a safety culture and minimise accidents related to humans and machines.
If possible, consider and avoid certain high-risk activities. Continuing such activities might increase expenses and cause significant losses at the advanced stages of the project.
While purchasing engineering insurance, understand all clauses, inclusions & exclusions, scope of coverage, etc., properly to avoid hassle at the time of claim settlement.
Now that you have clarity on what engineering insurance is and its scope of coverage, pick an insurer with a high CSR (i.e., claim settlement ratio) and good customer service reviews and ratings. Contractors and employers can implement the above-mentioned risk management strategies, invest in a comprehensive engineering insurance plan from a reliable insurer, and enjoy a tension-free, smooth project execution.