CPM Policy can be issued covering equipment on “Anywhere in India basis” with following stipulations.SUM INSURED –
The Sum Insured shall be equal to the cost of replacement of the insured property by new property of the same kind and same capacity, i.e the replacement cost of the Machinery including .PERILS COVERED
Unforeseen and sudden physical loss of insured equipment & machinery from any cause including
- fire & lightning, external explosion, earthquake(at additional premium), flood, inundation, subsidence, landslide and rockslide.
- storm, tempest, hurricane, typhoon and tornado .
- accidental damage while at work due to faulty man handling, dropping or falling, collapse , collision and impact.
- burglary, theft, riot & strike and malicious damage.
- Third party liability
- Owner's surrounding property
- Clearance and removal of debris
- Additional custom duty
- Express freight
- Air freight
- Dismantling of CPM equipment and shifting to a new location.
- While it is at work or at rest
- While being dismantled for cleaning or overhauling or
- Re-assembling thereafter.
It covers plant & machinery that are lying at contractor’s own premises, various locations if any to be advised to insurer(Policy schedule may also include more than one locations (projects sites) with separate list of Contractors Plant , Machinery & Equipment at each location (Project site) whereas a Floater extra of 10%).EXCLUSIONS
The company shall not be liable under this policy in respect of -
- the Excess stated in the Schedule For the Individual value of the machine over Rs. 10Lakhs & upto Rs. 25 Lakhs Excess is 2 % of S.I. subject to a minimum of Rs. 30, 000/- for claims due to AOG perils and 1.00 % of S.I. subject to minimum of Rs. 12, 500/- for claims due to other perils.
- loss or damage due to electrical or Mechanical breakdown(But can be covered at additional premium).
- loss of or damage to vehicles designed and licensed for general road use unless these vehicles are exclusively used on construction site.
- loss or damage whilst in transit, from one location to another location. (Public Liability will not be payable while Contractors Plant & Machineries are on Public Roads).
- War, Invasion, act of foreign enemy, hostilities or war like operation .
- loss or damage directly or indirectly caused by, or arising out of, or aggravated by nuclear reaction, nuclear radiation or radioactive contamination.
The Policy can be taken either on Market Value basis or Reinstatement value basis or the combination of the two. A study of the types of valuation would help to choose the right one:
- Book Value:
- Market Value Insurance:
Book value is a theoretical value employed for accounting purpose. It is arrived by reducing fixed depreciation for wear and tear for every year on original capitalized cost. This does not represent the true market value which is always higher. Therefore, book value is not relevant for insurance.
Market value is the value at which the property can be bought or disposed off in the market. This is arrived at by deducting depreciation for usage from the current value of the brand new property of similar type. Alternatively, it is known as depreciated value. This depreciation is arrived at considering the residual life of the property and its present condition, which is different from the depreciation used to arrive at book value.
If insurance is taken on this basis, actual monetary value of the property (lost) just before the loss will be indemnified. However, this compensation will not be adequate to replace the damaged property by new one, because cost of new property will be higher due to inflation, escalation, depreciation applied etc., Solutions is to insure on REINSTATEMENT VALUE BASIS.
In Reinstatement Value Policy the sum insured must represent the current Replacement value of similar type of property in BRAND NEW condition. The premium rate is same as that applicable to Market Value Insurance.
If insurance is arranged on Reinstatement Value basis, insured is guaranteed of compensation adequate to reinstate the damaged property by new (similar type) at the prevailing market price. In other words, insured get brand new property in place of old in the event of an admissible claim and no depreciation is deducted. If the reinstatement value declared for insurance is found to be less than the actual value, the compensation payable will be reduced proportionately. Hence replacement value must be estimated very carefully.
Reinstatement Value Insurance is granted only for fixed assets like Building, Machinery, Furniture and Fittings. Stocks cannot be insured on Reinstatement value basis.
The Reinstatement Value Policy is subject to some special conditions as stated below:
- Works on Reinstatement must be carried out within 12 months from the date of loss. This may be relaxed in special circumstances.
- Reinstatement can be carried out at the same site or elsewhere, subject to insurers liability is not increased.
- If unable or unwilling to reinstate, the claim will be settled on Market Value Basis.
- Settlement on Reinstatement Value will be effected only after expenditure is incurred by insured and on production of final bills.
- Loss of earnings, loss by delay, loss of market or other consequential or indirect loss.
If replacement is done by an improved model, suitable monetary allowances for improvement will be deducted from the replacement cost payable under the policy.