Erection All Risk Policy

IRDAI License Number: IRDAI/INT/ISNP/2022/250

Cover defense cost
Legal advice, if required
Covernote/Risk Held Letter/Binder Letter Issued immediately after premium payment to the insurance company
Get comparative quotes from leading public sector and private insurance companies

Introduction

Who can take this Policy?

Coverage

Add on Covers

Basis of Sum lnsured

Exclusions

Erection All Risks (EAR) insurance offers protection to principal and contractors and also to manufacturers and suppliers erecting machinery and plant etc. against financial loss due to any sudden fortuitous and unforeseen causes resulting in loss or damage to the property insured at the project site whilst being stored, erected, tested and commissioned.

This policy is suitable for all types of civil engineering construction works ranging from small buildings to massive dams as they are susceptible to damage by a variety of external and internal causes during the course of construction and erection of plant and machinery respectively.

This policy is typical “all risk” insurance for storage, assembly/erection, testing and commissioning of the following types of activities. Unless specifically excluded, it provides comprehensive cover for :

Setting up a new project/individual machines
Expansion of an existing project
Dismantling and re-erection of an existing facility

The policy can be extended to cover the following on payment of additional premium :

Clearance and removal of debris
Escalation
Waiver of Subrogation
Design Defect
Off-site storage
Damage to owner's surrounding property
Maintenance visit / extended maintenance cover
Additional customs duty
Express freight
Air freight

Add on Covers - Free of Cost for Projects more than 100 Cr.

Clearance & Removal of debris upto 50 lacs
50/50 clause
72 hours
Loss minimization expenses
Free automatic reinstatement upto 10 % of the S:I
Professional Fees
Waiver of Contribution restricted between principal and contractor
Additional Custom duty upto Rs. 10 Crore
Expediting cost including Air Fright and Express Freight upto 30 % of net claim amount

The Sum Insured is the completely erected value of the plant and machinery, inclusive of freight, customs duty and cost of erection.

Loss or damage due to faulty design, or casting, bad workmanship other than faults in erection. This exclusion is limited to the items immediately affected and does not apply to any consequential loss to correctly executed items.
Cost necessary for rectification or correction of any error during erection unless resulting in physical loss or damage.
Loss or damage due to gradual deterioration, atmospheric condition, rusting etc.
Loss discovered only at the time of taking inventory.
Loss arising out of penalty for delay, non-fulfilment of terms of contract.
Consequential Loss
Excess

Why Choose PolicyLo.com

Professional and Experienced Team

Customized Solutions

Strong Relationship With Insurance Companies

Service Commitment Ontime Everytime

Technological Edge

Additional Services Offered

Competitive Premium

Single Window Solution

Important Points to remember while Buying the Policy

Adequate Sum Insured - To Avoid Underinsurance

Temporary Structure should be clearly mentioned

Almost in every project the requirement of temporary structure is there. It is the most important aspect to see at the time of taking the policy to clearly mentioned temporary structure and it's sum insured.

Ensure that assets should be covered under the right entity/company

Total Project Sum Insured and Total Project Duration

Total Project Sum Insured and Total Project Duration should be clearly motioned considering the general delays in project. It would be appropriate to insure the maximum period including the projected extension period.

Risk Location/s should be properly mentioned

Premium would be charged form day one in CAR/EAR Policies

Premium would be charged from the beginning of the project i.e. when first consignment reaches at project site or any work started on site or project commissioning date as per LOI/Awarded Contract.

Downloads

Proposal Form

Policy Wordings

Claim Form

Key Documents

General Claim
Intimation Format

Immediate Action Client
Should Take

Indicative General Documents
for Settlement of Claims

Peril Based Documents Required
for Settlement

Peril Based Documents Required for Settlement of Claim

Fire Group - Fire, Lightening, Explosion, Implosion

Fire brigade report if applicable
Lodge a police complaint in case of a fire arising out of - rioting mob, striking workers, malicious damage by third parties.
Meteorological report in case of Storm, tempest, flood and earthquake Photographs of Damaged Property showing extent of damage &/or video film of loss

AOG - Flood, Storm, Cyclone, Earthquake, Subsidence/Landslide

To substantiate quantum of loss, value of damaged insured property just prior to loss, & value of salvage. please make available to surveyors/investigators fixed Asset Register, original Bills/Invoice, Repairs/Replacement Bills/Invoices and stock Register
Newspaper cutting wherein the incidence of occurrence of flood/storm cyclone/earthquake/landslide has been reported
Meteorological Report

Social - Riot, Strike, Malicious Damage and Terrorism (RSMDT)

Police Panchnama/First Information Report/Final Investigation Report
Newspaper cutting wherein the incidence of riots has been reported
Photographs of Damaged Property showing extent of damage &/or video film of loss

Geological - Land Slide, Subsidence, Expensive Soils

Photographs of Damaged Property showing extent of damage &/or video film of loss
To substantiate quantum of loss, value of damaged insured property just prior to loss, & value of salvage. please make available to surveyors/investigators fixed Asset Register, original Bills/Invoice, Repairs/Replacement Bills/Invoices and stock Register
Newspaper cutting wherein the incidence of occurrence of flood/storm/cyclone/earthquake/landslide has been reported
Meteorological Report

Breakdown During Testing/Commissioning

Statement of eye witness to loss about cause of loss & circumstances of loss
Asset Register, log-book, original bills/Invoices/bill of entry of damaged property & repair/replacement bills/invoices to substantiate the quantum of loss (To be made available to surveyor).
Proforma invoices of new machine
Photographs of Damaged Property showing extent of damage &/or video film of loss

Theft and Burglary

Police report mentioning item/s stolen, date of incident and estimate of loss
Police investigation report
Photographs of Damaged Property showing extent of damage &/or video film of loss
To substantiate quantum of loss, please make available to surveyor/investigator, your stock register, original Bills/ Invoice, cash memos, fixed asset register, bank statement, cash-book/ledger
Inventory of articles kept in bank-locker
Letter of Subrogation for transferring rights of recovery to insurance company after the claim is paid

Our Insurance Partners

Claim Case Study - 1

Situation

In a erection policy for Transmission line project there was theft of huge amount of nuts, bolts, copper wire and other metal items. There was no sign of entry and exit and even the client was not able explain how it was possible for the thieves to take away the metal items weighing in thousands of Kilograms.

Challenge

Losses that arise due to shortage and unexplained disappearance, evident at the time of taking the inventory are not payable under the policy.

Solution

Physical stock should be verified from time to time and an appropriate inventory should be made to exercise control over stored items.

Advisory/Conclusion

Client was advised to take physical stock on regular basis so as to reduce the unexplained loss of Inventory.

Claim Case Study - 2

Situation

Faulty Design

Challenge

Loss arising due to Faulty design was not payable under the policy taken.

Solution

Faulty design or design defect is a risk normally occurs in construction and erection. Coverage of risk vary insurer to insurer. If it is not covered in the basic policy, the add-on should be opted.

Advisory/Conclusion

Design defect need to be added in the Policy.

Need Assistance

FAQ's

PREMIUM

COVERAGES

CLAIMS

OTHERS

How is premium determined?

The premium under this policy depends on the type of activity, Sum Insured, duration of the project, period of testing and voluntary excess opted for by the Insured. The premium can be paid in installments, when the policy period is more than 12 months.
Can there be any discounting on Terrorism Premium rate under EAR Policy?

Yes, Discounting is allowed under Terrorism section if Sum Insured is above 100 Crores and Project duration is above 12 months.
What are the Installment option under EAR Policies?

Installments can be Quarterly, Half yearly or yearly based upon duration of the project.
Are projects policy duration extended on pro rata premium?

If there is a Pro-rata extension clause written in the policy then it is extended on pro rata otherwise it will depend upon various factors such as percentage of work pending, Reason for delay, Bar Chart etc.

What is the in-build testing period under EAR Policy?

EAR Policy has in-build testing period of 1 Month which can further be increased depending upon project type.
Is Contractors Portion of risk covered under EAR Policy?

If the portion of Contractors work is less than 50% then same can be covered under EAR Policy.
Can the Insurance under EAR Policy be extended due to delay?

In Erection all risk policy, if a project gets extended the same can be endorsed under the policy. You need to inform the insurer in advance about the extension. Additional premium would be charged for the incremental period to extend coverage.
When does EAR Policy Terminates?

Cover terminates on the date of expiry as per policy or on completion of Erection and Trial run whichever is earlier.

During erection of project e.g. welding causes fire. Are dismantling charges and debris removal charges payable under the policy?

Crane/Bulldozer hiring charges and labour are admissible subject to limits specified in the policy.
Does the claim affect the extension premium under EAR Policy?

Yes, the claim under the policy may impact policy extension premium rate that is why it recommended to opt for longer duration at one go.
What are the Exclusions under EAR Policy?
Major Exclusions under EAR Policy is as follows:
- Excess in respect of each claim as stipulated
- Inventory Losses, Normal wear & tear and gradual deterioration due to atmospheric condition or otherwise, rust, scratching of painted or polished surface or breakage of glass
- Loss or damage due to faulty design, defective material or casting
- War and warlike operation
- Nuclear reaction, nuclear radiation or radioactive contamination
- Willful act or negligence of Insured
- Consequential Losses of any kind or description such as losses due to penalty, delay, lack of performance, loss of contract.
What are the documents required in case of a theft claim under EAR Policy?
Documents required would be as follows:
- FIR Copy
- Incident Report
- Purchase invoice of items
- Claim Bill etc.

What does EAR Policy Covers?

The Policy protects Principal or Contractor against. The policy can be taken by the Principal, Contractor and Sub Contractor either individually or jointly.
What is Erection all risk Insurance?

This insurance covers all types of risks involved in the erection of machinery, plant and steel structures of any kind, as well third-party claims in respect of property damage or bodily-injury arising in connection with the execution of an erection project.
What is the minimum period for which EAR Policy can be issued?

Minimum Period for which EAR Policy can be issued is 2 Months.
What is the Maximum period for which EAR Policy can be issued?

Maximum Period for which EAR Policy can be issued is 84 Months including testing period.
What is rate charged for extension of EAR Project?

Normally if there is no claim or Claim ratio less than 60% and Prorata extension clause is there in the policy then prorata extension rate is charged otherwise it will depend upon lots of factors such as reason for delay, Updated bar chart, Build up value etc.