Are you a business owner looking to protect your company against unexpected risks and losses? If so, then you need to consider buying Erection All Risk Insurance (EAR Insurance). This type of insurance provides coverage for projects involving the installation, testing or commissioning of machinery, equipment or structures. EAR Insurance safeguards your business from sudden and unforeseen damages such as fire, natural disasters and accidents during installation and testing.
In this article, we will guide you through everything you need to know about buying EAR Insurance for your business, along with the factors that influence the premium of an erection risk insurance policy.
Understanding Erection All Risk Insurance
Erection All Risk (EAR) Insurance is a specialised policy designed to protect businesses engaged in projects that involve installation, testing or commissioning machinery, equipment or structures. This insurance covers unseen damages to machinery such as solar panels, boilers, thermal power stations, gas pipelines and fabrication. Typically, the coverage starts once the insured property is unloaded at the project site during the first consignment. This policy is essential for contractors, engineers and project owners who face financial risks due to potential physical loss or damage during the construction process.
The primary coverage of an EAR policy includes:
- Accidental physical damage or loss to the insured’s construction project, including machinery, equipment and structures.
- Provides protection during the installation, testing and commissioning phases of machinery and equipment.
- Provides third-party liability coverage to protect against claims for injury or damage caused by the erection process of the insured.
EAR Insurance Does Not Cover (Exclusions):
- Pre-existing damage or defects.
- Normal wear and tear.
- Wilful acts or negligence
- Design flaws or poor workmanship.
- War, nuclear risks and allied perils
- Consequential losses (financial loss due to delays or contract penalties).
Steps to Buying Erection Risk Insurance for Your Business
When buying an Erection All Risk policy in India, it’s important to assess your project risks carefully and select the right coverage options. Here’s a step-by-step guide to ensure you get comprehensive coverage:
1. Assess Your Coverage Needs
- Identify Project Scope: Consider the nature, scale and duration of your erection or installation project.
- Evaluate Risk Exposure: Assess risks such as fire, theft, earthquakes, floods, and human errors during installation.
- Determine Additional Coverage: Decide if you need add-ons like debris removal or maintenance period coverage.
2. Research Insurance Providers
- Compare Multiple Insurers: Choose insurers specialising in EAR policies.
- Check Reputation: Review claim settlement ratios, customer feedback, and financial stability.
- Understand Policy Terms: Some insurers offer customised policies with better terms for specific industries.
3. Customise Your Policy
- Sum Insured: The policy should cover the full erected value of your machinery, including freight, customs duty and erection costs.
- Policy Period: The coverage should match the project timeline, including installation and testing.
- Add-On Covers to Consider:
- Debris removal costs (after an insured loss).
- Escalation cover (inflation protection during the policy period).
- Trerrorism
- Off-site storage
- Owner’s surrounding property
4. Understand Exclusions
- Standard EAR policies exclude damages due to design flaws, defective materials, and poor workmanship.
- Losses due to war, nuclear risks, and terrorist activities are not covered unless specifically added.
- Consequential losses (like delays in project completion) are not covered.
- Coverage is not provided for lost/misplaced inventory
- Injuries to workers of the project is not covered
5. Analyse Erection Risk Insurance Premium Costs
- Premium Breakdown: Includes the base premium and cost of add-ons.
- Factors Affecting Premium:
- Project size and complexity.
- Type of machinery/equipment involved.
- Location (high-risk zones like flood-prone areas have higher premiums).
- Safety measures and past claims history.
- Get Multiple Quotes: Compare quotes from different insurers to get competitive pricing.
6. Review Policy Terms Before Buying
- Coverage Limits: Ensure the policy limits are sufficient to cover your project risks.
- Deductibles: Understand how much you need to pay before the insurer covers the claim.
- Policy Wording: Read all terms and conditions to avoid surprises during claims.
7. Seek Expert Advice
- Consult an insurance broker or advisor who specialises in EAR policies.
- Leverage their expertise to tailor the policy and negotiate better terms.
8. Verify Documentation Before Policy Activation
- Accurately fill the proposal form with all project details.
- Provide supporting documents such as:
- Project timelines.
- Machinery specifications.
- Risk assessment reports.
- Ensure the Certificate of Insurance clearly mentions all terms and conditions.
9. Understand the Claims Process
- Immediate Notification: Report damage/loss within a short time (preferably, within 7 days of detection).
- Evidence Collection: Maintain photos, damage reports, and invoices to support claims.
- Insurer Inspection: Major claims require an inspection before repairs begin.
- Police Report: Required in case of theft or malicious damage.
10. Regularly Review and Renew the Policy
- Review Coverage periodically to ensure it meets ongoing and future project needs.
- Inform your insurer about significant changes to the project.
By following these steps, you can secure a robust Erection Risk Insurance policy that effectively protects your business against installation and erection-related risks.
Cost of Erection All Risk Insurance and Factors That Affect It
The cost of an EAR insurance policy in India depends on several key factors:
1. Project Scope and Value
- Larger projects with high-value equipment attract higher premiums.
- The sum insured must match the full erected value to avoid claim reductions due to underinsurance.
2. Type of Equipment and Machinery
- High-value or complex machinery increases the premium.
- Risk-prone equipment (fragile or requiring specialised handling) may need higher coverage.
3. Project Location
- Projects in flood-prone or earthquake-prone zones have higher premiums.
- Remote or difficult-to-access locations may increase costs.
4. Policy Coverage and Add-Ons
- More add-ons (debris removal, escalation clauses, transit cover) increase premiums.
- Third-party liability coverage is an optional extension.
5. Insurer’s Risk Assessment
- Businesses with a history of frequent claims may face higher premiums.
- Good safety practices can lower premiums.
6. Deductibles
- Choosing higher deductibles lowers the premium.
- Lower deductibles mean higher premiums but reduced out-of-pocket expenses at claim time.
7. Economic and Regulatory Factors
- Inflation impacts equipment, labor, and insurance rates.
- Premiums are subject to GST (Goods and Services Tax) in India.
By carefully evaluating these factors, businesses can optimize their EAR Insurance costs while ensuring sufficient coverage.
Final Thoughts
Erection All Risk Insurance is a crucial safeguard for businesses involved in installation and commissioning of projects. Understanding coverage, exclusions, claim procedures and cost factors will help you make informed decisions while purchasing the policy.
Investing in EAR Insurance is not just a financial decision; it’s a strategic risk management tool to ensure your business remains protected from unforeseen construction and installation risks.
