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MACHINERY BREAKDOWN MACHINERY BREAKDOWN INSURANCEINSURANCE

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Types of Engineering PoliciesTypes of Engineering Policies

I.I. Operational PoliciesOperational PoliciesAnnual policy for machinery / equipment

II.II. Project PoliciesProject Policies

Project based policy for erection/construction, and isterminated once the project is over or the policy endswhichever is earlier

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Operational PoliciesOperational Policies

Machinery BreakdownMachinery Breakdown Electronic EquipmentElectronic Equipment Boiler ExplosionBoiler Explosion Machinery Loss of ProfitMachinery Loss of Profit

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MACHINERY BREAKDOWNMACHINERY BREAKDOWN

An ideal cover for plant and machinery, to cover cost of repairs or replacement of damaged parts as a result of accidental Electrical and Mechanical Breakdown.

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Subject Matter of insuranceSubject Matter of insurance

All Mechanical & Electrical Equipments

Egs: Generators, transformers, motor, lifts, elevators, Egs: Generators, transformers, motor, lifts, elevators, engines etcengines etc

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Machinery Breakdown Insurance is to supplement Fire Insurance

( The perils covered under fire policy are excluded under MBD )

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Scope of coverScope of cover

It covers all accidental , electrical and mechanical breakdown

Unforeseen and sudden physical damage to the Unforeseen and sudden physical damage to the insured machineryinsured machinery

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Cover remains in force at all stages –

- When the machine is at rest or operation

- During the process of dismantling and overhauling

- During subsequent re erection at the same premise

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Covers Both External & Internal parts of the machinery

It is intended for all types of Machinery, Plant and Equipments.

Causes can be either External or Internal

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Internal CausesInternal Causes

Faulty Material Faulty Material Defects in castingDefects in casting Faulty construction of partsFaulty construction of parts Short circuitShort circuit Faulty erectionFaulty erection Failure of operations of safety devicesFailure of operations of safety devices

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External CausesExternal Causes

Lack of SkillLack of Skill CarelessnessCarelessness Falling bodiesFalling bodies Electrical overpressureElectrical overpressure Failure of other connected machineryFailure of other connected machinery Foreign objectsForeign objects

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CHECK YOUR UNDERSTANDING CHECK YOUR UNDERSTANDING ON COVERAGESON COVERAGES

1. The rubber belt was placed wrongly in a machine so it snaps and breaks because of which it the machine stops functioning.

Will this be covered ?

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Yes It will be covered because it comes under “ faulty workmanship cover”

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2. The rollers in the machine roll out and fall due to the vibration of the machine because of which the machine stops functioning.

Will this be covered ?

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Yes It will be covered as it comes under “falling bodies”

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3. There is some carpentry work happening next to a machinery. A small piece of wood accidentally enters the machine and the machine stops functioning.

Will this be covered ?

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Yes it will be covered as it comes under “Entry of foreign Objects”.

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ExclusionsExclusions

Fire and Allied Perils

Willful act or gross negligence

Defects at the time of commencement of insurance which the insured is aware

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Consequential Loss

War and like perils

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BASIS OF ARRIVING ATBASIS OF ARRIVING AT

THE SUM TO BE INSURED THE SUM TO BE INSURED

The sum to be insured should be the current The sum to be insured should be the current new replacement value of the machinery to be new replacement value of the machinery to be insured. insured.

If the value insured is subject to change, e.g. due to price increase, the Insured must notify Insurer of such change, so that the S.I. may be adjusted accordingly and underinsurance is avoided.

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The sum insured should include;

NEW REPLACEMENT COST OF INSURED PROPERTY

FREIGHT

CUSTOM DUTIES

ERECTION COSTS

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Methods to arrive at the correct SIMethods to arrive at the correct SI

a) Brand new machinery

The value of these items can be ascertained from the suppliers of the equipment and the sum insured can be arrived at by adding the various expenses

The cost of equipment obtained from the suppliers should be of the same model, capacity and type, as installed in the premises

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b) Old equipment

If the suppliers of the equipment are still in the market & if the machinery installed in the premises is still being produced and sold ; then a quotation be obtained form the suppliers for arriving at the sum insured.

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c) Obsolete equipment

If it is not possible to ascertain replacement cost at all, then the last available price of such an equipment, or of an equivalent model & capacity, should be taken.

This together with custom duty and other charges, as applicable at the time of effecting the insurance, should be taken as Sum Insured.

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ExtensionsExtensions

On specific requests, the following extensionsOn specific requests, the following extensions

can be covered in MBD Policiescan be covered in MBD Policies

a) Additional Custom Duty covera) Additional Custom Duty cover

Takes care of additional duty payable for replacement of equipment and/or spares in the event of loss.

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b) Extra charges for Express freight (excluding air freight), b) Extra charges for Express freight (excluding air freight), over time, Sunday and holiday rates of wagesover time, Sunday and holiday rates of wages

On account of occurrence of insured peril, some times it becomes necessary to undertake the repair work on holidays.

The spare parts may have to be obtained by express freight.

To take care of these expenditures, an estimated amount that may likely be incurred following major accident should be taken as Sum Insured under this head.

Only actual expenses are reimbursable.

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c) Air freightc) Air freight

Specific coverage should be taken for air freighting of items.

Only actual expenses are reimbursable.

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d) Third Party Liabilityd) Third Party Liability Liability for damage to property to Third Parties

and/or injury to person not in the employ of the insured arising out of damage to the insured machinery.

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e) Owner’s Surrounding Propertye) Owner’s Surrounding Property

Damage to the other surrounding property owned by the insured arising out of damage to the insured machinery.

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Undesirable risk:Undesirable risk:

Power plant, brick works, quarries, minesPower plant, brick works, quarries, mines Used by builders –bulldozers, excavators Used by builders –bulldozers, excavators Industries where conditions are Industries where conditions are

extraordinary loadsextraordinary loads Used underground, installed in aircraftUsed underground, installed in aircraft Experimental machineryExperimental machinery

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Underwriting considerationUnderwriting consideration

Repair facilities Repair facilities Nature of the riskNature of the risk Loss experienceLoss experience Statutory and other inspection reportsStatutory and other inspection reports Higher excessesHigher excesses MakersMakers

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Types of Claim SettlementTypes of Claim Settlement

2 Types of losses are considered before settling a claim:

Partial Loss

Total Loss

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Partial LossPartial Loss

Cost of replacement of parts without deduction for Depreciation.

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Total LossTotal Loss

The actual value of the item immediately before the occurrence of the loss

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MBD - SUMMARYMBD - SUMMARY

DefinitionDefinition

Machinery breakdown policy is an ideal cover for plant and machinery, to cover cost of repairs or replacement of damaged parts as a result of accidental Electrical and Mechanical Breakdown

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MBD - SUMMARYMBD - SUMMARYCoverage

It covers all accidental , electrical and mechanical breakdown

Cover remains in force at all stages of the machine

External or Internal

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MBD-SUMMARYMBD-SUMMARY

ExclusionsExclusions

Willful act or gross negligence Awareness of defect at the time of the

commencement of cover Consequential Loss War and like perils

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MBD - SUMMARYMBD - SUMMARY

Losses:Losses:

Partial loss – the part damaged is repaired with no depreciation charged

Total loss - Part is replaced