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LIC Product and Forms
LIC OF INDIA
 
General Insurance >> Engineering Insurance >> Machinery Breakdown

Machinery Breakdown insurance was developed to grant industry effective insurance cover for expensive plant, machinery and mechanical equipment. This insurance is important for everyone who operates the machines. This policy should support our property insurance and hence this insurance must not be granted on a stand - alone basis.

Subject Matter Insured

All types of machinery, plant, mechanical equipment and apparatus may be covered under MBD insurance, such as for example power generating units, power distributing plant as well as production machinery and auxiliary equipment, etc.

Scope Of Cover
By its nature, Machinery Breakdown Insurance is an “accident” insurance on machinery. Thus,
It covers unforeseen and sudden physical loss of or damage to the insured items.
Faulty design faults at workshop or in erection, defects in casting and material.
Faulty operations, failure of safety system / lubrication system / control system, lack of skill, negligence.
Extension Available Under This Policy
Third party liability.
Expediting costs.
Additional customs duty.
Claim Procedure

The policy condition clearly lays down the procedure to be followed by an insured in the event of damage to the insured machinery.

 It would be desirable to obtain a claim from duly completed and signed and to check that both the item and the risk involved are insured under the policy. It is also essential at the outset to check whether there is any machinery Loss of Profits insurance in force covering the damaged machinery. If so, immediate action is necessary for minimizing the loss under the Machinery Breakdown policy.

 A qualified engineer surveyor is generally deputed to assess the loss who will then scrutinize claims estimates, determine the cause of the accident and certify that the charges claimed for repairs are reasonable. An up - to - date copy of the policy should be made available to the Independent Surveyor, if engaged in the initial stage so that he is fully acquainted with the terms, conditions and excess under the policy.

Loss Settlement Procedure
Partial Loss Basis

In cases where the damage can be repaired, the basis of indemnification is the cost of restoration to working order based on the customary daily rates of wages together with normal freight and erection costs and other duties. Customs duties and dues, if any have been included in the sum insured. In such cases of repairable damage, no deduction is made for wear and tear, depreciation, etc.

For parts with limited life, depreciation factor has to be taken into consideration.

Total Loss Basis

If the cost of the repair as mentioned above equals or exceeds the actual value of the machinery insured immediately before the occurrence of the damage the settlement shall be made on Total Loss Basis.

Under total loss basis, the basis of indemnification is the market value of the item immediately before the accident plus the cost of removing the damaged machinery less the value of the salvage.

Any extra charges incurred towards repairs, such as Express Delivery, Overtime and holiday rates and wages, are payable only if special provision for these items has been made in the Policy in consideration of which an additional premium is charged.

All costs of alterations, additions, improvements and overhauls carried out on the occasion of a repair are to be borne by the insured. The Cost of provisional repairs will be borne by the insure if such repairs constitute part of the final repairs and do not increase total repair expenses. The insurer will make payments only after being satisfied by production of the necessary bills and documents, that the repairs have been effected or replacement have taken place as the case may be.

Position After A Claim

The insured is not entitled to abandon any property to the insured whether taken possession of by the insurer or not.

From the day of the loss the sum insured for the remainder period of insurance is reduced by the amount of compensation. To prevent under insurance during the remaining period of insurance the sum insured must be reinstated. The premium will be calculated pro - rata from the day the repaired item is again put to work up to the date of expiry of the policy.
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