Loaders, cranes and other heavy equipment are under some kind of a risk due to those arduous tasks. The exposure is considerably higher than other operating equipment which increases the plausibility and intensity of damages. And, all the contractors know that replacement is costly. Repairing those damages or replacing the entire equipment can cost them a fortune. This can rip you apart in terms of the project you’re handling and drain all the finances immediately.
How would you minimize the risk? Is there a way to totally eliminate the risk? Yes, you have the option of property plant and equipment insurance from a specialist company. Let’s find out the tips to keep in mind before choosing such a crucial risk remover.
The main purpose of insurance is coverage but every other policy differs in terms of repair and replacement, deductible or no cost, evaluating the reasons for damage, etc. Furthermore, there is an option to cover operating risks and third party property liability. Where operating risks cover all external calamities such as fire, explosion, theft, fraud or any spontaneous combustion damage, etc., third party property liability is for insurance against damages to others who are not related to the project.
Coverage for additional risks
The equipment breakdown insurance policy covers only the replacement and repair cost, there are some additional vulnerabilities for the project when machinery doesn’t work. These might be referred to as indirect costs to the project due to unwanted interruptions. The first type is itself business interruption insurance which covers loss due to the breakdown of any machinery. The delay in the project increases those expenses and adds to the loss of income for the company and the contractor. Another type includes renting replacement equipment cost coverage until the damaged part is replaced or fixed. Make sure both of these types of coverage present in the policy.
Now, for every contractor opting for an insurance policy, there is an imperative homework the contractor has to do. There are some policy documents they need to be cognizant about. Some terms and conditions hugely affect the policy. The ideal scenario is when contractors choose the companies which offer coverage for replacement cost. This means that the companies will provide you the claim without discounting the depreciation on the equipment. The claim you get is based on the coverage type you select rather than the actual cost.
What to do for rental equipment?
The contractor is held responsible for any damages even if he has rented out the machinery only when the lender doesn’t have his own coverage. In this case, the contractor will receive the claim and otherwise the lessor. Insuring heavy equipment requires the contractor to go through the terms and conditions and determine if they require another insurance policy. The terms and conditions of leased equipment will be different based on the risks involved in the daily usage of that particular equipment.
A small mistake from the contractor might lead to a big disappointment for the whole project. A thorough understanding of how property plant and equipment insurance works is mandatory for everyone involved in the project.