Plant and equipment cover: need-to-know for brokers

Plant and equipment cover: need-to-know for brokers

Good housekeeping makes a significant difference when it comes to insuring machinery, plant and equipment in an Engineering Plant insurance policy.

The Miramar Engineering Plant Insurance policy can be written as a stand-alone product and does not need to be linked to property insurance. The types of risks covered depend on the operation and maintenance of the plant and equipment, rather than the industry in which the client operates.

It is vital brokers encourage their clients to regularly maintain their plant and equipment, keep it secure and be able to show strong risk management procedures including training for operators to keep premiums at a minimum and assist with claims.

Machinery breakdown cover is for sudden and unforeseen physical loss or damage to Insured electronic control equipment, including machinery, plant, and/or equipment. It covers unbudgeted repair costs, or erosions that lead to equipment break down or accidental damage requiring repairs or replacement of parts but does not cover the cost incurred in the replacement or restoration of electronic data

“We cover damage by electrical or mechanical breakdown, power surges and accidental damage from operator error, for example, an employee accidently dropping a tool into a rotating machine,” says Barry Regan, engineering underwriter at Miramar Underwriting Agency, who explains the three-strong engineering team will aim to turn around new business within 24 to 48 hours.

Cover may be available for loss of stock, business interruption and computer or electronics failure subject to cover. Cover does not include wear and tear, such as rust, corrosion and normal maintenance. Perils such as fire, lightning, storms, floods and malicious damage are typically covered under a different policy.

There are a number of other considerations to make when insuring machinery, plant and equipment, and we explore three aspects of this cover brokers must consider when advising clients.

1. Provide the underwriter with as much accurate information as possible

This should include a detailed description and the location of the plant and equipment and the claims history of the items to be covered under the policy. The plant and equipment (to be insured) must be in good working order and without material defects Photos are always handy,” says Barry, adding that the claims history of the machinery is the salient factor when it comes to assessing the risk.

2. Understanding if policies include a co-insurance clause

When it comes to deterioration of stock, a common practice is to limit the scope of the cover, according to Barry. For instance, a business may have $1 million worth of stock under refrigeration across ten rooms. The insured party may make an assessment it would only ever expect to lose one room in an insurable event and select a $100,000 limit for cover. Hence, it only pays a premium on 10 per cent of the total value of the stock.

In this situation, some insurers apply a co-insurance clause, meaning if the company loses $100,000 worth of stock, the insurer may only pay $80,000 of the $100,000 because the client had chosen to carry much of the risk itself. This is called co-insurance.

A number of insurers will cover the full $100,000 in the event of a loss and brokers should ensure they understand which policies incorporate co-insurance and which don’t.

3. Policies should reflect seasonality

During peak periods such as Easter and Christmas, businesses including catering and hospitality tend to hold substantially higher stock levels. This means a machinery breakdown or failure of equipment such as a refrigeration plant can have a serious impact on the Insured business.

“A number of policies have built-in seasonal increases to cover levels, so refrigerated stock is properly protected. At other times of the year when stock levels are lower, cover levels can be reduced to reflect that,” Barry says.

No matter the season, it’s important for policyholders to ensure the equipment covered by this type of policy is well maintained. Brokers have a role in ensuring clients understand their obligations when it comes to maintenance of their insured equipment enabling a smooth claims process and that the right level of premium is always paid.

For more information about Miramar Engineering Insurance products, you can contact us on 02 9307 6600 or email us at engineering@miramaruw.com.au.

Miramar Underwriting Agency Pty Ltd (ABN 97 111 534 797, AFSL 314176) (‘Miramar’) acts under a binding authority as agent for the insurer of the products, Zurich Australian Insurance Limited (ABN 13 000 296 640. AFSL 232507). The information in this blog is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this blog is accurate at the date it is received or that it will continue to be accurate in the future.