Machinery breakdown insurance provides security for the machines used by factories and industries. This insurance covers accidental breakdowns and physical damage to the machinery, as well as the cost of repairs or replacement of the damaged machine parts. Some insurance companies also offer riders to cover additional risks to the machinery or other aspects like cost, air-freight, machine foundation, customs duty, etc.

• Machinery Breakdown Insurance Covers

The Machinery breakdown insurance policy covers the loss due to sudden and accidental machinery damage emerging from both internal and external causes. Some of the causes can be short circuit, structural defects, loosening of parts, excessive speed and lack of lubrication. Let us look at the situations when machinery breakdown insurance can be used:

• Machinery breakdown due to short-circuits, excess voltage, and electrical faulty design, faulty material, and faulty casting that manifest after the warranty period due to electrical and mechanical breakdowns

• Abnormal operating conditions of the machine

• Falling, impact and collision resulting in breakdowns

• Carelessness and lack of operating skills in the operations and management of machinery

• Turbines bursting, compressors, hydraulic cylinders or other apparatus which is subjected to centrifugal force or internal pressure

• Damage or loss due to initiation of fire from within the machinery is also included which is generally excluded from the standard fire protection policy

The protection is offered for machines both in working and in rest condition. Some other conditions are when dismantled or moved or re-assembled for cleaning, inspection or repair.

• Exclusions

Machinery breakdown insurance can be availed by machine owners of large-scale organisations or MSMEs of India. However, there are various exclusions in the policy. Let’s review some exclusions based on the two categories – General Exclusions and Special Exclusions.

1. General Exclusions: This includes war, civil war, riots and strikes

2. Special Exclusions include the following:

• Fire and allied perils, theft, etc.

• Loss or damage as a result of to overload experiments

• Gradual development of abnormalities, defects, cracks etc. in any part being ignored regularly in spite of knowing it demands repair

• Regular wear and tear of the machinery

• Pre-existing faults or defects in the machinery before the policy commencement

• Loss of use of the machinery due to conditions in the plant or factory or any other kind of consequential loss incurred by the insured

• Loss or damage because of explosions in chemical recovery boilers

• Damage to belts, chains, ropes, rubber tyres or any other exchangeable tools unless any loss or damage to the machinery is indemnifiable

Important Aspects 

• After making the claim, the insured cannot leave the property whether the company has taken the possession or not

• As from the day of loss, the sum insured for the remaining period of insurance will be reduced by the amount of compensation

• Premium will be calculated from the day the repaired item is put to work

Advantages of Machinery Breakdown Insurance

Some of the benefits under this insurance policy are:

• Reimbursement of the sum insured for the machinery and insured parts helps the business owner overcome the losses

• It also protects other additional coverage items like air-freight, customs duty and labour charges, etc.

• Some insurance companies also offer business interruption claims under the policy and offer discounts to policyholder to compensate for business losses in the absence of running the machinery

• It provides comprehensive coverage to the machinery thereby giving great peace of mind to the business owners covering loss due to unskilled machinery operators, cranes or lift forks, etc.

• Some plans cover detailed electrical, mechanical and electronic faults that may result in the complete or partial breakdown of the machinery

• Insurance companies provide great customer support options to machinery owners and the process of claims is easy and transparent

• Third-party coverage is also included in some of the policies