Machinery Breakdown Policy

It is an ideal Policy for all kinds of plant and machinery, to cover cost of repairs or replacement of damaged parts as a result of unforeseen and sudden physical damages. It Provides protection to the insured machinery whilst at work or at rest and also when they are being dismantled for the purpose of cleaning, inspection and overhauling or removal to another position in the course of their operations or subsequent re‐erection, provided these are performed in the same premises.

Unforeseen and sudden physical damage to the insured machinery in specified premises.
Major electrical and mechanical breakdowns of the plant and machinery covered are:
Short circuiting, excess voltage & electrical arcing
Faulty design, faulty material and faulty casting (manifesting after Warranty period)
Abnormal operating conditions
Carelessness and lack of skill in the operation and maintenance of machinery
Entry of foreign bodies
Falling, Impact, Collision etc
Bursting or disruption of turbines, compressors, cylinders of steam engines, hydraulic cylinders or fly wheels or other apparatus subject to centrifugal force, internal pressure.
It also covers loss or damage due to fire, originating from within such insured electrical machinery and resultant fire damage to such machinery only.

The Sum Insured for each item covered must represent the New Replacement Cost.
If Machinery is available in market: Current list Price+ (plus) Taxes & Duties, Delivery Costs to the site, Erection Cost + (plus) Suitable escalation for the policy period.
If not available for sale and only spare parts price are available: last available Price List + (plus) Loading/Discounts for price variation (Where relevant)+(plus) Taxes & Duties, Delivery Costs to the site, Erection Cost +(plus) Suitable escalation for the policy period
If no Price List is available: Purchase/Delivery Price +(plus) Loading/Discounts for price variation (Where relevant) +(plus) Taxes & Duties, Delivery Costs to the site, Erection Cost +(plus) Suitable escalation for the policy period. Discounts and special price agreements upon purchase of the items to be insured should not be taken into consideration when determining the Sum Insured.
For this purpose the Sums insured should be reviewed at frequent intervals and, if possible, values should be linked to an acceptable index showing the fluctuation in prices. An annual revaluation of the items of plant and machinery should also be carried out in order to ensure that the Sums Insured are always kept up‐to date.
Under-insurance should be avoided; otherwise claims for repairs or replacements are paid only in the proportion which the Sum Insured bears to the current new replacement value. In other words, the claim settlement becomes subject to the condition of Average

Add on covers.

Express freight, holiday and overtime rates of wages.

Air Freight.

Third Party Liability

Custom Duty


Key Features

All equipment should have a serial number (Full details of the machine i.e. manufacturer’s name, type, year of manufacture, serial number) or any identification mark. The same is to be mentioned in the proposal.

Machines, which are under erection or testing and commissioning, should be insured only after initial performance / test operations have completed successfully.

Machines proposed for insurance should be in worthy working condition with proper preventive maintenance programme . Safety devices wherever provided on the machines must be in proper operating condition.

A Machinery Insurance Policy does not cover electronic equipment such as Computers, Medical and Biomedical Equipments, Microprocessors, Audio/Visual Equipments.

Equipment having computerized controls and operations, which are integral to the equipments, can be insured either under MBD policy or under EEI policy. If value of electronics portions is predominant, it is recommended to take the EEI policy for such equipments / machines.

Cover for part of machinery and Gear Boxes under Machinery Insurance (MI) Policy - Gear Boxes should not be insured in isolation but should be insured either with the ‘drives’ or the driven equipment. Parts of machines should not be insured separately; their values should be included in the total value of the machine to which they are related.

In respect of Turbo generator sets proposed to be covered under Machinery Insurance Policy, for the purpose of Sum Insured, break-up is acceptable for Turbine, Alternator, Gear Box, Control Panel and Cables.

In cases where insurance of foundations or oil in transformers and other electrical equipment is specifically required, their values should be declared separately.

Spares/Standby Equipments: For all standby or spare electrical and mechanical equipments, 50 % discount is permissible provided only one machine remains in operation, at any one time.


Fire & allied perils, theft, Loss, damage resulting from overload experiments or tests requiring the imposition of abnormal conditions.

Gradually developing flaws, defects, cracks or partial fractures in any part not necessitating immediate stoppage and repair although at some future time repair or renewal of the parts affected may be necessary.

Wear and tear losses arising out of ordinary usage or working.

Faults or defects which were in existence when the insurance was arranged and known to the insured.

Damage due to faults or defects for which the manufacturer or the supplier is responsible either by law or under contract.

Loss of use of the insured's plant or property of any other consequential loss incurred by the insured. Loss of or damage to belts, ropes, chains, rubber tyres, knives or exchangeable tools and such other parts; unless loss or damage to the equipment/machinery is indemnifiable in terms of the policy.

War & civil war or riot, strike and kindred risks, Nuclear risks