Engineering Insurance: Covering Risks in Construction and Infrastructure Projects
Like most engineering projects today, they tend to be complex and quite risky. Accidents and other unforeseen on site events can happen from natural disasters to equipment failures that can have significant financial losses, or project delays. For these risks, engineering insurance has provided companies engaged in construction and infrastructural development and industrial projects, a vital safety net.
This blog will identify the different kinds of engineering insurance available, its relevance in securing projects, and offer business interruption insurance, erection all risk insurance and industrial all risk policy.
An Introduction to Engineer’s Insurance
Engineering insurance is an insurance specialty for construction, engineering and infrastructure projects. And these projects are always at the risk of many other risks, equipment breakdown, machinery damage, construction defects and so on and so forth like an earthquake or even a flood. A construction project’s engineering insurance is insurance for both the physical assets of the project and the financial liabilities associated with the actual construction process.
The significance of engineering insurance cannot be overstated, and especially so in today’s construction projects, so large and broad ranging. But regardless of whether it’s a large infrastructure development, or the construction of a manufacturing plant, all companies need to safeguard their investment against the potential risks. But without proper insurance, the least subtle thing can derail a project, costing huge amounts of money, and a great loss of reputation.
Different Types of Engineering Insurance
Different segments of construction and infrastructure projects require different types of engineering insurance. In the list of the most critical insurance risks are business interruption insurance, erection all risk insurance and industrial all risk policy.
Business Interruption Insurance
Business interruption insurance is meant to compensate for income loss resulting from a previously unforeseen occurrence which impedes, interferes, delays or interrupts the usual course of business. This insurance is very useful in terms of construction and engineering projects. Substantial project delays, such as construction delays, machinery breakdown or accidents on site can cause financial losses.
For instance, if a natural disaster were to damage a construction site, it would stop briefly, preventing work from continuing for a few months, business interruption insurance may help foot the bill of income lost during the lull. This type of coverage is a must for any contractor or company engaged on long term projects for which the delays will have very severe financial consequences. Companies protect their financial stability and alleviate serious cash flow problems by protecting income during interruptions.
Business interruption insurance also covers the expense of relocating to another location, or for additional costs to bring about the completion of such projects in a timely manner, due to a disruption. It could include paying overtime for workers or the expense of renting temporary equipment to take the place of broken machinery. The insurance covers these expenses so as soon as a business is interrupted, the insurance helps businesses get back up to speed as quickly as possible.
Erection All Risk Insurance
Erection all risk insurance (EAR) is a coverage specifically designed to protect the contractor against erection, installation and steel structure erection risk for construction projects. This type of insurance provides complete coverage of the erection phase from when materials get on site till the project is completed and over to the client.
For contractors and construction companies, erection all risk insurance is important as it is a risk cover to a wide range of risks caused during the structure’s erection process, including accidents, machinery failure and material damage. Particularly in large industrials projects, the erection of heavy machinery and complex equipment is an important aspect of the project and this one of insurance can be particularly useful in that case.
For example, consider that a crane collapses while erecting a large piece of machinery which damages the equipment and nearby structures, erection all risk insurance would pay for repairing or replacing such equipment and other structures. It also covers third party liability protecting the company from liability should an accident happen or property damage take place on nearby properties.
Erection all risk insurance is one of the key benefits and it is also flexible. It can be customized according to the needs of the different projects, to cover all possible risks. Its importance therefore makes it imperative to be part of any comprehensive engineering insurance plan.
Industrial All Risk Policy
An industrial all risk policy (IAR) covers an industrial or manufacturing plant with risks ranging from fire to theft, to machinery breakdown and natural disasters. An industrial all risk policy is an insurance policy that basically provides coverage for the operational phase of a project once construction is completed and the facility being constructed becomes operational.
For large infrastructure projects, such as power plants, factories and industrial facilities where risks go beyond the construction phase this type of policy is essential. An industrial all risk policy includes coverage protection for the physical assets of the plant such as buildings, machinery, and equipment as well as liability coverage against damage or accidental injuries to persons.
The industrial all risk policy besides covering physical damage also includes business interruption insurance that protects companies with financial losses as a result of the operational downtime. For example, let’s say that a fire in a manufacturing plant wrecked some critical machinery, such that production is halted for several months, the policy would pay both the repair costs and the loss of income due to the downtime.
An industrial all risk policy is especially beneficial to businesses whose success depends on machinery and equipment. This policy offers comprehensive coverage for physical assets and operational risks, which enables businesses to recover quickly from unexpected events and run business with little disruption.
Engineering insurance — its importance and role in risk management
Infrastructure and Construction Projects are inherently risky and companies without appropriate insurance coverage can find it very challenging financially. Engineering insurance provides a complete solution to engineering risk as companies can be protected from a variety of hazards.
The use of engineering insurance also has the benefit that companies can transfer their risk to an insurance provider. Through a premium, businesses can pay to ensure themselves being financially safe in unforeseen incidents. They can thus concentrate on basically getting the project done without having to put on the infectious brakes when thinking about the profits and losses related to accidents or delays.
Besides such coverage, engineering insurance offers liability coverage. And it’s particularly important in construction and infrastructure projects, where accidents can result in the injury or damage to third party property. However, the costs of liability claims can be quite expensive and take time, but with the right insurance an insurer can relieve the company frae these costs and protect its personeel.
Additionally, business interruption insurance, erection all risk insurance and industrial all risk policy can be customized to fit a variety of projects. The flexibility means that companies can find the coverage that they need, irrespective of the organization whether it is a small residential development or a big scale infrastructure project.
Conclusion
Construction and infrastructure are ever changing, and engineering insurance is essential. From protecting a project from delay through the erection phase or a business’ capability to recover from a disaster, the right insurance coverage is critical.
Business interruption insurance, erection all risk insurance and industrial all risk policy specifically help companies protect against the numerous risks involved in the building and industrial project. Not only do these policies protect you financially, but they give you peace of mind so that your business can continue doing what it was made to do: Complete projects on time and on budget.
