A contractor’s plant and machinery (CPM) insurance policy intends to safeguard the interests of policyholders including contractors, investors of a civil engineering project, and owners of machinery and plants. This type of insurance is designed to cover any external loss or damage to the insured machinery installed at their construction projects. The construction machinery that can be covered under CPM are cranes, bulldozers, compressors, and forklifts among other similar items.

Contractors opting for this policy can choose coverage for some or all of their equipment, based on their specific needs. They must always make sure that the machines they insure are properly taken care of and not used too much. While the insurance cover begins as soon as the equipment arrives at the construction site or when the project begins (whichever comes first), it remains valid for a year from the signing of the contract.

Key Features of Contractors Plant & Machinery Policy

  • A contractor's plant and machinery insurance policy is typically determined based on the present replacement value of the insured machinery.
  • The majority of such insurance policies offer options for both full and partial coverage, as well as comprehensive protection for total damage to equipment or machinery.
  • The insurance policy can be acquired subsequent to the successful commissioning of the machinery or plant.

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What Does CPM Insurance Coverage Include?

Here are the general coverages offered under the contractor’s plant and machinery insurance policy:

Physical Damage to Insured Plant and Machinery 

  • CPM insurance protects the insured plant and machinery from any type of physical damage for any possible reason. However, it is important to ensure that the reason is not categorically excluded from the policy coverage.
  • The insurance policy offers coverage for the insured machinery whether they are in operational condition or at rest.
  • The coverage is also valid when the machinery is dismantled for overhauling for cleaning purposes

Additional Coverage Options:

The customers can also avail add-on benefits on their CPM insurance policy, including:

  • Additional customs duty
  • Debris clearance or removal
  • Owner’s surrounding area policy
  • Moving to a new location & dismantling
  • Freight expenses
  • Third-party liability

What are General Exclusions on CPM Coverage?

Here are some common exclusions in contractors plant and machinery insurance policies:

  • Damage resulting from electrical or mechanical failures is not covered under the policy.
  • Damages existing prior to policy inception are excluded from coverage.
  • Specific components like drills, knives, and saw blades are not covered for damage.
  • Damage caused by the explosion of pressure vessels or boilers is excluded.
  • Machinery damage due to earthquakes is not covered.
  • Damages resulting from terrorism activities are excluded from coverage.
  • Vehicles intended for general road use are excluded, unless exclusively for construction site use.
  • Loss or damage occurring during transit is not covered.
  • Damages arising from nuclear power plant activities are excluded.
  • Damage caused by the insured's wilful negligence is not covered.
  • Partial or total immersion in tidal waters leading to damage is excluded.
  • Loss or damage incurred while using machinery underground is not covered.
  • Loss or damage to inventory is excluded from coverage.
  • Negligence of the manufacturer or supplier, bound by contract or legal provisions, is not covered.

Advantages of CPM Insurance

The Contractor's Plant & Machinery Insurance Policy (CPM) provides crucial protection for contractors by covering potential losses or damages to their plant and machinery used in construction projects. Here are some key advantages of having a CPM policy:

  • Financial Protection:

    CPM insurance shields the contractor from significant financial losses that may arise due to damage or loss of expensive plant and machinery. Since these assets are capital-intensive investments, any unexpected damage or loss could severely impact the contractor's finances. The policy ensures that repair or replacement costs are covered, reducing the financial burden on the contractor.
  • Coverage against External Perils:

    The policy covers damages caused by various external perils such as fire, accidental damage, riots, burglary, and other allied perils. This comprehensive coverage ensures that the contractor's plant and machinery are protected from a wide range of risks commonly encountered in construction sites.
  • Add-on Coverage:

    CPM policies are often customizable to suit the specific needs of contractors and the nature of their construction projects. Contractors can tailor the policy by selecting appropriate coverage limits, deductibles, and additional riders to align with their risk exposure and budgetary constraints.
  • Legal Compliance:

    Depending on the contractual requirements or local regulations, having a CPM policy may be mandatory for contractors. By obtaining the necessary insurance coverage, contractors ensure compliance with legal obligations, thereby avoiding potential penalties or disputes with project stakeholders.
  • Business Continuity:

    In the event of damage or loss to insured plant and machinery, the CPM policy facilitates prompt repairs or replacements. This helps in minimizing downtime and ensures that the construction project can continue without significant interruptions, thereby safeguarding the contractor's business interests.
  • Peace of Mind:

    Ultimately, having a CPM policy provides peace of mind to contractors, knowing that their valuable plant and machinery assets are adequately protected against unforeseen circumstances. This allows contractors to focus on their core activities without constant worries about potential losses or liabilities related to their equipment.

In the Nutshell

In conclusion, a Contractor's Plant and Machinery Insurance Policy is essential for safeguarding the investments of contractors in the construction and infrastructure industry. This specialized insurance policy provides indemnification for damages incurred by insured machinery or plant during operations, rest periods, or maintenance activities.

However, it's crucial to note that certain exclusions exist, such as damages caused by earthquakes, terrorism, or willful negligence of the insured. Despite these limitations, the policy offers comprehensive coverage for most other perils encountered in construction work.

Contractor's Plant and Machinery Insurance Policy offers contractors peace of mind by covering repair and replacement costs, thereby ensuring business continuity and mitigating financial risks associated with equipment damage. By investing in this insurance, contractors can focus on their projects with confidence, knowing that their vital plant and machinery assets are adequately protected against unforeseen circumstances. 

For more information, you can contact BimaKavach right away. BimaKavach is a licensed insurance consulting firm, dealing mainly in business insurances.

1. Why is understanding depreciation important in a CPM policy?

Understanding how depreciation is applied in a CPM policy is crucial for contractors to accurately assess the coverage provided for their plant and machinery assets. It ensures transparency in the valuation process and helps in determining the appropriate compensation in case of loss or damage.

2. What value of machine/equipment should the insurance cover?

The insurance should cover the cost of replacement by new equipment of the same kind and capacity, including freight, custom duties, and erection costs.

3. Can I change the value of insurance during the policy period?

Yes, there's provision to adjust the sum insured during the policy period by contacting the policy issuing office.

4. What equipment can be covered under the policy?

Any contractor's plant & machinery equipment utilized in construction or erection sites, such as excavators, rollers, dumpers, cranes, and drilling machines, can be covered.

5. Who can take out a CPM Insurance Policy?

The CPM policy primarily serves civil contractors who own Contractor's Plant & Machinery, ensuring their equipment is adequately covered against damage or destruction related to civil engineering projects.

6. Am I eligible for a premium refund if I cancel the policy?

Yes, a provision exists for a premium refund if the policy is canceled during its term.

7. Are additional covers available in the CPM Insurance policy?

Yes, additional covers such as insured's own surrounding property cover, express freight overtime, and third-party liability holiday wages are on offer, among others.

8. Can I cover equipment working at multiple locations?

Yes, the CPM Policy can cover equipment on an "Anywhere in India" basis, with a loading of up to 10%, excluding transit risks between sites.

9. Does CPM insurance cover damages during cleaning or overhauling?

Yes, the policy covers damages to machines during cleaning, overhauling, or while at work or rest, after successful commissioning.

10. Should I inform the company if I replace an old machine with a new one?

Yes, it's necessary to inform the company immediately if machines covered under the policy are replaced.

11. Can I cover equipment registered with the RTO under this policy?

Yes, the insured has the option to select either Motor or CPM Policy for machinery/equipment registered with RTO but engaged at project sites.

12. Is transit risk covered under this policy?

No, transit risk from one site to another is excluded from coverage.