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Contractor's Plant and Machinery Insurance

For machinery owners and contractors, this policy provides compensation against potential losses due to equipment damage.

What is Contractor’s Plant and Machinery Insurance?

Contractor's plant and machinery insurance (CPM) is a specialized insurance for contractors and construction companies. It protects against damage or loss to the machinery and equipment used in construction sites and factories. It covers a wide range of both owned and hired-in equipment such as: Bulldozers, Loaders, Cranes, Compressors, Generators, Excavators It also covers third-party claims against property damage and bodily injury caused at the insured construction site during the tenure of the policy.

Features of Contractor’s Plant and Machinery Insurance

Who needs

Contractor’s Plant and Machinery Insurance?

CPM insurance, also known as Contractor's Plant and Machinery insurance, offers coverage for various parties involved in construction projects. Contractors and construction companies, as primary stakeholders, often opt for this insurance to protect their machinery and equipment against damage or loss during the project lifecycle. Equipment rental companies, whose business relies on providing machinery to construction projects, also find CPM insurance beneficial to safeguard their assets. Additionally, individual equipment owners can choose to insure their machinery under CPM policies, ensuring protection against unforeseen events. Moreover, bank and financial institutions investing in construction projects may require CPM insurance as part of their risk management strategy to safeguard their investments. Overall, CPM insurance serves as a vital risk mitigation tool for all parties involved in construction ventures, providing financial security and peace of mind throughout the project duration.

Why get Contractor’s Plant and Machinery Insurance?

Construction contractors rely heavily on machinery and equipment for their work. Some contractors choose to rent these machines, while others own them.However, if any of these machines get damaged or lost during construction, it can lead to a significant financial loss because these machines require a substantial investment.A CPM (Construction Plant and Machinery) policy provides insurance coverage for the damage or loss of construction equipment such as compressors, cranes, bulldozers, and excavators. This coverage applies to accidents caused by external events like fires, riots, strikes, vandalism, storms, floods, earthquakes, and so on.Whether the equipment is actively being used, undergoing maintenance, or simply at rest, this insurance policy protects against both partial and total damage.

Coverages & Exclusions in

Contractor’s Plant and Machinery Insurance

Contractor’s plant and machinery (CPM) insurance provides coverage for the risks associated with machinery and equipment used by contractors in construction projects. Here are some common coverages typically included in this insurance policy:

Clearance and Removal of Debris
In the event of a covered loss, this add-on coverage provides reimbursement for the costs incurred in removing debris resulting from the damage to insured machinery and equipment.

Transit Coverage
This coverage extends protection to the insured machinery and equipment during transit, including loading and unloading, between different project sites or locations.

Plant and Machinery Cover for Physical Damage
This coverage protects the insured contractor against accidental physical loss or damage to the insured machinery and equipment. It includes coverage for covered perils such as fire, theft, flood, vandalism, accidental damage, and more. This coverage applies to items in use or at rest, or when they are being dismantled or cleaned, or when they are subsequently erected.

Some common exclusions typically found in contractor’s plant and machinery (CPM) insurance policies in India :

1. Mechanical or electrical failure or breakdown.
2. Pre-existing flaws and damages.
3. Losses resulting from the explosion of a pressure container or boiler.
4. Vehicles developed and licensed for regular on-road use.
5. When the factories or machinery are located on public highways.
6. Deterioration of machinery owing to inactivity.
7. Replaceable accessories and parts, such as knives, bits, drills, saws, cutting edge parts, molds, and so on, which have a greater rate of depreciation or wear by default.
8. Crafts or vessels used on the water.
9. Damage or loss caused by partial or total immersion in tidal surges.
10. Nuclear threats, war, or war-like activity.
11. When the machine is being tested.
12. Underground machinery other than tunnel boring equipment.
13. Any type of indirect loss.
14. Damage caused by terrorism.
15. Negligence or deliberate behavior by the insured or his representatives
16. Any damage for which the supplier or manufacturer is accountable.

Add-on Coverage

Third-party Liability
This add-on coverage protects the insured contractor against legal liabilities arising from bodily injury or property damage caused to third parties due to the insured machinery and equipment's operations. It includes coverage for legal defense costs and settlement amounts.
Express Freight Cover
This add-on coverage compensates for the additional cost of express freight charges incurred to replace or repair insured machinery and equipment in the event of a covered loss. By providing this coverage, the policy ensures that the contractor can quickly obtain the necessary machinery or equipment to resume work and minimize project disruptions.
Escalation of Cost
This add-on cover ensures that in the event of a covered loss, the insured contractor is reimbursed for the increased expenses of repairing or replacing damaged machinery or equipment. As a result of inflation or price changes on the market, project costs may escalate.
Air Freight
This add-on coverage compensates the cost of transporting insured machinery and equipment by air in the event of a covered loss. A good example of this coverage is when time is of utmost importance and the quickest way to minimize delays is to transport the machinery or equipment by air.

About Contractor’s Plant and Machinery Insurance

What is the full form of CPM insurance?

The full form of CPM insurance is Contractor's Plant &Machinery Insurance. It is also known as Construction Plant and Machinery Insurance.

What is floater cover in CPM policy?

The 'floater cover' typically refers to a type of coverage that provides protection for a contractor's movable machinery and equipment. This coverage is designed to safeguard the insured items located at different places against various risks and perils they may be exposed to.

What is the difference between peril and coverage?

a. A peril refers to a specific event or circumstance that may cause damage, loss, or harm to the insured property or individual.
b. Perils can include natural disasters like fire, flood, and earthquake, as well as human-caused events like theft, vandalism, or accidents.
c. Coverage, on the other hand, refers to the protection provided by an insurance policy against specific perils.
d. It outlines the scope and extent of financial reimbursement or assistance that an insurance company will offer in the event of a covered loss or damage.

What perils are covered under the contractor’s plant and machinery insurance?

The typical perils that may be covered under CPM insurance include:
a. Accidental damage
b. Earthquake
c. Fire and lightning
d. Theft and burglary
e. Flood and inundation
f. Storms, cyclones, and tempests
g. Damage caused by intentional acts of vandalism, sabotage, or malicious actions by third parties

What is the duration of the contractor's plant and machinery insurance policy?

Typically, CPM insurance policies are issued for a specific period known as the policy term. Generally, this depends on how long the project will last, or how long the equipment and machinery will be in use. It can range from short-term policies that cover a specific small project over a specified time frame, to long-term policies that provide coverage for long-term projects/contract periods.

Is plant and machinery a liability or asset?

In general, plant and machinery are grouped into the category of assets, more precisely, tangible assets. The term tangible asset refers to an asset that has physical substance, including inventory, a building, rolling stock, manufacturing equipment, and office furniture.

Who can take the contractor's plan and machinery insurance policy?

The policy can be taken by the owner, lessor, or hirer (responsible either legally or through a leasing agreement) of the machinery/equipment. Banks and institutions investing on a construction project can also take this policy.

What are the additional add-ons one should purchase along with this policy?

a. Owners surrounding property
b. Third-party liability
c. Escalation
d. Removal of debris
e. Inclusion of express freight, overhead charges, airfreight charges, and overtime wages
f. Additional customs duty

Is it necessary to always update my insurance provider when my contact information changes?

Yes. It is always important to inform the insurer of any changes in your contact information. This will ensure that you will receive all correspondence promptly.

How to make an insurance claim for contractor’s plant and machinery?

Please follow the steps mentioned below-
a. Inform your broker instantly. They will handhold and guide you through the entire claim settlement process.
b. Give the surveyor of the insurer your complete cooperation.
c. Submit a completed claim form along with any necessary documents to show the financial loss caused by the accident.

Should I inform the company if my old machine/equipment is replaced by a new machine of the same type and model?

Yes. When the CPM insurance is issued, the insured needs to provide the serial numbers of the machines at his disposal. If the machines are replaced, the insurer must be informed immediately.