Machinery Breakdown Policy

This is an insurance policy which indemnifies the insured against any financial loss incurred due to loss or damage to its machinery as a result of sudden accidental electrical and mechanical breakdown.

It reimburses the insured for the cost of repairs or replacement of machinery of like nature.

An individual or a company which uses machines for the production of any item and which will suffer financial loss due to failure of such machine must take insurance in order to protect its financial interest.

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All types of industrial machinery as well as electrical machines can be covered under the policy.

Some of such machines are compressors, pumps, turbine, transformer, electrical motor, generator etc.

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Since Machinery Breakdown Insurance Policy has new for old or replacement clause which means in case of machine failure the insurance company will provide for the replacement cost or repair cost to bring the machine back to its original condition hence the Sum Insured under the policy should be sum of Present Market Cost of Brand New Machine, Custom duty, Excise Duty, Freight, Insurance, Installation, Handling Charges, etc.

In case the insured opts for lower Sum Insured which doesn’t adhere to above formula for Sum Insured Calculation then the claim will be settled in the same proportion as the Sum Insured bears to the replacement cost of that machine.

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The policy covers all kinds of electrical and mechanical breakdown resulting from the following incidents:

  1. Faulty material/workmanship of the machine
  2. Action of centrifugal forces contributing to disruption of the rotating parts
  3. Failure of lubrication due to malfunctioning of lubricating oil pumps or its breakdown.
  4. Malfunctioning or failure of safety devices.
  5. Electrical short-circuiting including electrical fire originating from failure of insulation and or over voltage or under voltage conditions.
  6. Abrupt and sudden stoppage of other connected machinery.
  7. Entry of foreign bodies into running machine.
  8. Inexperienced operations causing damage due to error of judgment or error in operation.

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The policy can be extended to include the following risks on payment of additional premium.

  1. Damage to foundation of machinery
  2. Damage to oil in electrical apparatus
  3. Express freight (excluding air freight), holiday rates, overtime charges
  4. Air freight
  5. Additional custom duty i.e the additional percentage of duty payable at the time of reimport for replacement over and above the percentage of duty included in the original sum insured.
  6. Own surrounding property i.e. damage to the insured’s own existing property or property in his custody or control (not included in the sum insured of the policy) due to any damage to the insured machines which is covered under the policy.
  7. Third party liability i.e. liability falling on the insured for bodily injury to any other party other than those covered by the policy or for property damage belonging to such other party.

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In case of any such incident which falls under the scope of the policy, the following steps should be followed:

  1. Please inform the insuring office by phone, letter or fax.
  2. Take all necessary steps to minimise the loss.
  3. Obtain estimate of repair from repairer of your choice.
  4. Submit this repair estimate and claim form to the surveyor deputed by the insurance company.
  5. After getting clearance from the surveyor, proceed for repairing machine or ordering for replacement as the case may be.
  6. Submit actual bills of repair/replacement with proof of payment to the surveyor.

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