Engineering Insurance: Definition, Types, and Benefits
Engineering insurance is a specialized type of insurance designed to protect against risks arising from construction projects, installation of machinery, and operation of industrial equipment. These projects usually involve high capital investment, complex technology, and unavoidable risks such as natural disasters, accidents, or equipment breakdowns.
With engineering insurance, project owners, contractors, and even third parties are financially protected if physical damage, accidents, or unforeseen events occur during construction, installation, or operation.
Why Engineering Insurance is Important
- Investment Protection – Safeguards expensive construction and engineering projects.
- Risk Transfer – Financial risk is shifted from contractors or owners to insurers.
- Contractual Requirement – Many project contracts mandate engineering insurance before work starts.
- Delay Coverage – Helps cover additional costs if a project is delayed due to accidents.
- Stakeholder Confidence – Ensures trust from investors, governments, and clients.
Types of Engineering Insurance
Contractors’ All Risks (CAR) Insurance
Provides comprehensive coverage for civil construction projects. It protects against material damage (earthquake, fire, flood, landslide) and third-party claims caused by construction failure. Suitable for roads, bridges, dams, and large infrastructure.
Erection All Risks (EAR) Insurance
Covers the installation and erection of machinery and equipment. It includes protection from risks during transportation, assembly, and testing. Commonly used in power plants, factories, refineries, and large-scale industrial projects.
Machinery Breakdown Insurance
Protects against sudden and accidental breakdowns of machinery during operation. It covers repair and replacement costs, ideal for manufacturing plants, power generation, and industries using heavy machinery.
Boiler and Pressure Vessel Insurance
Provides coverage against explosion or breakdown of boilers and pressure vessels. It includes repair costs, property damage, and third-party liabilities.
Electronic Equipment Insurance (EEI)
Covers electronic systems such as computers, servers, telecommunications, medical equipment, and navigation devices. It insures against fire, short circuits, natural disasters, or operator error.
Civil Engineering Completed Risks (CECR)
Protects civil works that have been completed but are still within the maintenance or defect liability period. Examples include bridges, tunnels, and dams.
Loss of Profit Following Machinery Breakdown (MLOP)
Covers financial losses due to interruption of production following machinery failure. This ensures a company’s cash flow and profit are protected during downtime.
Risks Covered by Engineering Insurance
- Fire, explosion, and electrical short circuits
- Earthquakes, floods, storms, lightning, and landslides
- Human error and operational negligence
- Mechanical breakdown and design failure
- Theft or loss of equipment
- Third-party claims for bodily injury or property damage
Common Exclusions
- Intentional damage or fraud
- War, invasion, or terrorism (unless extended)
- Normal wear and tear
- Pre-existing design defects
- Violations of safety or legal standards
The Claim Process in Engineering Insurance
- Loss Notification – The insured party must immediately report the incident to the insurer.
- Investigation – A surveyor assesses the damage, cause, and estimated cost.
- Documentation – Contracts, incident reports, and evidence of loss must be submitted.
- Assessment and Approval – The insurer evaluates the claim in accordance with the policy.
- Compensation – Once approved, the insurer pays compensation to the insured.
Benefits of Engineering Insurance
- Broad financial protection against construction and machinery risks
- Ensures project continuity without major disruptions
- Strengthens investor and client trust
- Prevents bankruptcy caused by large-scale damages
- Supports national infrastructure development
Conclusion
Engineering insurance plays a vital role in construction, industrial, and infrastructure projects. From skyscrapers and bridges to power plants and manufacturing plants, every large project carries inherent risks.
By choosing the right policy—whether Contractors’ All Risks, Erection All Risks, or Machinery Breakdown—companies can secure their investments, protect stakeholders, and ensure project sustainability. Engineering insurance is not just a contractual requirement but a smart risk management strategy for modern industries.