Overview
Erection All Risk (EAR) Insurance is a specialized policy designed to cover the installation and commissioning of machinery, plant, and steel structures during construction projects. It differs from traditional construction insurances like Contractor’s All Risk (CAR) in both scope and application.
While CAR insurance covers civil construction activities like roads, bridges, and buildings, EAR focuses specifically on electrical and mechanical erection—such as turbines, boilers, lifts, or production plants. EAR also includes third-party liability, accidental damage, and even fire or explosion risks during the erection phase.
This type of policy is crucial for industrial, engineering, and infrastructure projects where expensive machinery is involved and precise installation is essential.
Construction business involves various types of risks, ranging from financial, project management risk, environmental risk, and contractual risks to safety and regulatory risks. Considering the high-risk exposure, having various types of construction insurance suitable for the business is important. Specifically, if the business is involved in construction projects that include the erection and installation of machinery, plant, and equipment, the erection all risk insurance is important to a safeguard the business. This article, let us understand how erection all risk insurance is different from other construction insurance.
What is erection all-risk insurance?
Erection All Risk (EAR) policy is a type of construction insurance that is designed to give protection against the risks associated with the installation, and erection of machinery, plant, or equipment during a construction project. The erection all risk policy coverage includes compensation for physical loss or damage to the insured items during the erection or installation phase. This insurance typically offers financial protection to project owners, contractors, and other parties involved in the construction project.
To understand, let us take an example of a construction project involving the installation of a critical component. An industrial boiler in a manufacturing facility for plant operation. Let us assume that the boiler sustains damage due to unforeseen circumstances during transit. Having erection all risk insurance would cover the damage that occurred during transportation, providing financial assistance for repairs or replacement.
The difference between the erection all-risk insurance and other construction insurance
There are various types of construction insurance available apart from erection all-risk insurance, such as contractor’s all-risk insurance, builder’s risk insurance, and employer’s liability insurance. Let us understand how does erection all-risk insurance policy differs from other construction insurance.
| Components | Erection all-risk policy | Other construction insurance |
| Scope of coverage | Provides coverage for loss and damage arising from risks associated with erection, and installation of equipment, plant, and machinery. | Includes various types such as Contractor’s All Risk (CAR) insurance and builder’s risk insurance coverage, which provides broader coverage. These insurance coverages apply for the entire construction project, including construction machinery, materials, and the completed structure. |
| Risks | Specifically focuses on the risks during the installation and testing of equipment. This can include risks like transit damage, assembly damage, manufacturing defects, handling, and erection-related damages. | Offers coverage for a broader range of risks throughout the construction process. This includes risks related to construction materials, machinery, structures, and third-party liabilities. |
| Applicability | Erection all risk insurance is specifically tailored to the construction project’s erection and installation-related risks. Contractors, project owners, engineers, design professionals, investors, manufacturers, logistic providers, etc., typically purchase this. It is common in industries such as manufacturing, infrastructure, and power generation. | These insurance policies provide broader coverage and are hence applicable to a wider range of construction projects. This includes roads, bridges, buildings, and other civil engineering projects. |
| Cost | The erection all-risk tariffs depends on several factors. This includes project value, type of equipment or machinery, project duration, coverage requirement, location, and more. | The cost for other construction insurance like contractor’s all-risk insurance depends on factors like project location, scope, experience, safety track record, coverage duration, etc. |
Erection all-risk insurance offers tailored coverage to specific risks during a construction project. On the other hand, other construction insurance like contractors’ all-risk insurance policies provides comprehensive coverage for a wide range of risks in the construction industry. It is important for contractors, project owners, and manufacturers to carefully consider their insurance needs. And then buy coverage to have adequate protection against potential risks.
Conclusion
Erection All Risk insurance is important for the successful and secure execution of construction projects. It is crucial for construction professionals to carefully assess the risks associated with their projects and obtain a suitable combination of insurance coverage to ensure comprehensive protection. Seeking expert opinions and advice can help tailor insurance policies to specific project needs.
FAQs
Q) What is Erection All Risk (EAR) insurance?
A) EAR insurance covers risks related to the erection, testing, and commissioning of industrial plants and machinery during construction projects.
Q) How is EAR different from Contractor’s All Risk (CAR) insurance?
A) While CAR covers general civil engineering work (buildings, roads), EAR is focused on electrical, mechanical, and structural installations like turbines or power plants.
Q) Who should buy EAR insurance?
A) Project owners, EPC contractors, or subcontractors involved in erecting plant and machinery should consider EAR coverage.
Q) Does EAR insurance cover third-party liability?
A) Yes, most EAR policies offer third-party liability protection in addition to covering physical damage and installation-related risks.
Q) What risks are covered under EAR insurance?
A) It typically covers fire, explosion, theft, human error, natural disasters, and testing-related damages during the erection period.
Q) Is testing of machinery included in EAR coverage?
A) Yes, coverage usually extends to testing and commissioning phases after erection, up to a pre-defined duration.
About The Author
Pankaj
MBA Insurance and Risk
With seven years of expertise in the insurance sector, Pankaj is a seasoned authority in Construction All Risk (CAR) insurance. As a dedicated contributor to SecureNow’s blog and article platform, they adeptly unpack the intricacies of CAR policies. He is deeply committed to empowering construction professionals with comprehensive insights into risk mitigation and coverage nuances. Their proficiency in navigating insurance landscapes ensures readers receive current and actionable guidance. Pankaj‘s passion for fostering understanding and resilience within the construction industry has firmly established them as a trusted source of knowledge and support.