Physical damage to any machinery or equipment in a factory can pose a big loss to the business. Factories need to be prepared for such breakdowns in order to continue working smoothly and overcome the loss. To meet with such eventualities, factories can purchase machinery breakdown insurance.

What is Machinery Breakdown Insurance?

Machinery breakdown insurance provides a security cover to the machines used by factories and industries. This insurance covers accidental breakdown and physical damage of the machinery, 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 and customs duty, etc.

What Machinery Breakdown Insurance Covers?

The 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.

There are two scenarios representing replacement cost of the machinery:

Partial Loss: In case of partial loss to the machinery, the coverage will include full cost of parts, including labour charges, air-freight charges, custom duty and the charges for dismantling and re-erection of the machinery.

Total Loss: Sum insured in this scenario covers the actual value of items immediately before the occurrence minus the applicable depreciation value.

Certain extra coverage can be enjoyed on the payment of additional premium. These cases include express freight, air freight, custom duty and third party liability.