If construction work is your business, you know that insurance is one of the most important things. It financially protects your workers, equipment and business from accidents or natural disasters. Engineering All Risk Insurance (more popularly known as Erection All Risk insurance) is a type of construction insurance that covers the cost of repairing or rebuilding structures that have been damaged or destroyed. It can also cover the cost of productivity lost due to construction delays.
Erection All Risk (EAR) insurance is essential for any business that erects structures, whether a small home builder or a large commercial contractor. It’s a necessary part of a business that helps to protect your bottom line.
What is engineering all risk (EAR) insurance?
Engineering All Risk (EAR) Insurance is a policy that covers accidental physical loss or damage to machinery, plant, equipment and structures during their erection, installation, testing and commissioning, along with third-party liability for bodily injury or property damage arising from these activities.
Why do you need engineering all risk insurance?
Erection Insurance can save construction engineers from potential bankruptcy arising out of the following scenarios:
- Erection All Risk insurance protects against the financial risks of erecting a new building, unloading at a construction site, storage, trials, maintenance, physical damages and the cost of any necessary repairs.
- It can offer peace of mind knowing that there is insurance to cover the costs if things deviate from the plan during the construction process.
- It can also help protect against any legal liability that may arise from the construction process.
- In some cases, Erection All Risk insurance can also cover the cost of demolishing a faulty structure.
- For businesses, Erection All Risk insurance can help protect against financial losses if a project is delayed or halted due to problems with the construction.
- In some cases, Erection All Risk insurance can also cover loss of rent or earnings if a business is forced to close due to construction problems.
- For individuals, Erection All Risk insurance can help cover the cost of repairs if a home is damaged during the construction process.
- It can also provide cover for the cost of alternative accommodation if families are constrained to move out of their homes for construction temporarily.
What are the inclusions in the erection all risk insurance?
Since the Erection All Risk policy offers comprehensive protection, the list of inclusions is quite long as follows:
- Coverage for loss or damage to the insured property during erection
- Coverage for professional fees and expenses incurred concerning the rectification of any faults or defects in the Insured Property.
- Coverage for loss or damage to scaffolding, formwork and falsework
- Coverage for temporary works
- Coverage for lifting operations
- Cover for load testing
- Cover for trial assemblages/ erection of prototypes
- Cover for work in connection with the construction of foundations
- Protection and indemnity cover the Insured’s liabilities arising out of the performance of the contractual obligations under the Erection Contract
- Cover for loss of or damage to erection plant and machinery
- Cover for third party liability arising out of the erection operations
- Cover for loss of or damage to materials, parts and equipment whilst in transit to the site of the insured property
- Cover for loss of or damage to materials, parts and equipment whilst in storage at the site of the insured property
- Cover for loss of or damage to materials, parts and equipment during installation
- Cover for Architects’, Engineers’ and Surveyors’ fees and expenses incurred for the rectification of any faults or defects in the Insured Property
- Cover for loss of rental income arising from any delay in the completion of the Insured Property caused by an insured event
- Cover for loss or damage to temporary buildings erected on the site of the Insured Property
- Cover for professional fees and expenses incurred for the redesign of the Insured Property as a result of any loss or damage covered by the policy
- Cover for loss of or damage to prefabricated units whilst in transit to the site of the insured property
- Cover for loss of or damage to prefabricated units whilst in storage at the site of the insured property
Note: This is an indicative list. Kindly read the policy wordings for detailed information.
Exclusions and limitations of erection all risk insurance
EAR insurance generally excludes war and terrorism, nuclear risks, wilful acts or gross negligence, normal wear and tear, faulty design or workmanship (unless resultant damage is covered), consequential losses, pre-existing defects and losses due to regulatory or safety non-compliance. Exclusions vary by insurer and may be modified through endorsements.
How to choose the right EAR policy?
Choosing the right engineering insurance, specifically an EAR policy, depends on matching coverage to your project’s risks, value and timeline.
- Assess project scope, risks and third-party liabilities.
- Set the correct sum insured based on total project value.
- Match the policy period to erection, testing and commissioning.
- Review key coverages and exclusions.
- Add required extensions if needed.
- Compare insurers on cost and claim reliability.
Conclusion
When choosing Erection All Risk Insurance, there are a few things you need to keep in mind. Firstly, ensure that you’re getting the right coverage for your needs. When choosing Erection All Risk Insurance, there are a few things you need to keep in mind. Firstly, ensure that you’re getting the right coverage for your needs. Secondly, compare quotes from several different insurers to get the best price. Finally, make sure that you understand the terms and conditions of your policy before you sign on the dotted line. By carefully reading over your policy, you can avoid any unpleasant surprises down the road.
FAQs
1. Does EAR insurance cover damage during testing and commissioning?
Yes, EAR policies usually cover testing and commissioning, but only if these phases are specifically included in the policy period and conditions. Some insurers apply sub-limits or stricter deductibles during testing.
2. Can multiple contractors be covered under one EAR policy?
Yes, a single EAR policy can cover the principal, main contractor and subcontractors, provided all parties are declared in the policy and their scope of work is clearly defined.
3. How is a claim settled under an EAR policy?
Claims are typically settled on a reinstatement or repair basis, subject to policy excess and depreciation (if applicable). Proper documentation, site records and compliance with safety norms are critical for claim approval.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure / policy wordings carefully for detailed information about on risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.