the insurer's Erection All Risk (EAR) Insurance covers all physical loss and damage to machinery, plant and equipment during the erection phase — from arrival at site to testing, commissioning, and handover. Written on an "all risks" basis with Section I (Material Damage) and Section II (Third Party Liability). Principal, Contractor, Sub-contractors — all insurable in one policy.
the insurer Engineering Insurance· First Engineering Product· All Risks Basis
EAR insurance provides comprehensive protection against ALL risks involved in the erection of machinery, plant, and steel structures — written on an "all risks" basis, meaning every peril is covered UNLESS specifically excluded. This is the opposite of a named-perils policy, and it's what makes EAR the most comprehensive engineering insurance product available.
Every peril covered unless excluded. Burden of proof on insurer — not the insured. Broadest coverage available for engineering projects.
All Risks — Not Named PerilsPhysical loss or damage to all insured property — machinery, plant, structures, contractor's equipment. From unloading to testing completion.
All Phases CoveredLegal liability for bodily injury, death, or property damage to third parties. Defence costs included. Per-accident limit basis.
TPL IncludedPrincipal, Contractor, Sub-contractors, Manufacturers, Financiers — all covered under one policy. No need for separate policies per party.
Joint Names AllowedThe highest-risk phase is fully covered. Safety device failure, short-circuit, chemical leakage during testing — all EAR perils. Most claims by value occur here.
Highest Risk PhaseFor long projects, premium can be paid in quarterly installments. Escalation provision protects against material cost inflation during construction.
For Long ProjectsIndia's NIP commits ₹111 lakh crore ($1.4 trillion) in infrastructure projects through 2030. PM Gati Shakti, PLI Scheme (14 sectors), Renewable Energy (500 GW target), DMIC, DFC — every electromechanical project in this pipeline requires EAR insurance during its installation phase. The addressable market for EAR insurance in India is effectively the entire NIP. the insurer, as India's oldest government insurer, is a natural partner for these large infrastructure projects.
Section I — Material Damage· Section II — Third Party Liability
EAR insurance has two sections — Section I (what happens to YOUR project) and Section II (what your project does to OTHERS). Both sections operate from the same policy inception to expiry date.
Coverage starts when first consignment is unloaded at project site. Damage during unloading, storage area transit, flood/rain damage to stored equipment.
✅ EAR ActiveMain phase — physical installation of all machinery, structural steel, equipment. Crane failure, falling objects, welding fires, human error, collapse.
✅ EAR ActiveHIGHEST RISK PHASE. Safety device failure, chemical leakage, insulation failure, short circuit, explosion during first run. Most claims by VALUE occur here.
⚡ HIGHEST RISK· EAR ActiveAfter handover. Latent defects manifesting, damage during contractor's remediation work. Covered ONLY with DLP extension — not in standard policy.
✅ With DLP Extension Only5 Parties· One Policy· Joint Names Allowed
"The EAR policy offers the possibility of including all parties to the contract in the same policy. The only conditions are: their names must be shown on the policy." — the insurer Faculty Material. This multi-party coverage is EAR's most commercially distinctive feature, eliminating disputes between parties about which policy covers which loss.
The entity commissioning the project — the largest financial stake. Once contractor hands over, the principal's operational insurance takes over.
Bears contractual responsibility for erection. Most contracts require the contractor to arrange EAR. Named on the policy alongside the principal.
Specialist sub-contractors for electrical, civil, piping, instrumentation work. Named in the policy — their work and liabilities covered under Section I & II.
Supplier who delivers and erects their own equipment under a turnkey contract — e.g., Siemens installing gas turbines. Full supply-and-erect coverage under one policy.
Banks, NBFCs, PE funds that financed the project — their collateral interest is protected via Mortgage Clause. Ensures the lender's security isn't destroyed by an uninsured project loss.
9 Optional Extensions· DLP· Earthquake· Debris Removal
The standard EAR policy can be extended with optional covers for specific project requirements. DLP, Earthquake, and Debris Removal are the three most universally important — every significant project should consider all three.
"Covers loss or damage caused by contractor while carrying out obligations under maintenance contract. Covers loss or damage occurring during maintenance period provided such loss or damage was caused during erection period." DLP: 12–24 months post-handover. Required by most contracts. Bridges the gap between EAR and operational insurance.
"Additional premium charged for risks in earthquake zones, higher rates for Zone I than Zone II." Standard EAR excludes earthquake. In Zone IV (Delhi, UP, Himachal) and Zone V (NE India, J&K, Himalayas), earthquake extension is essential. Cannot be opted in/out mid-term.
After a major loss, the cost of removing debris from the site can equal 20–30% of the reconstruction value. Standard policy covers repair/replacement of damaged property but NOT the cost of clearing the debris first. Essential add-on — especially for large industrial projects in urban locations.
"The policy can be taken with Escalation provision at additional premium." For projects >24 months, material costs (steel, copper, equipment) can inflate significantly. Escalation provision automatically adjusts the SI by an agreed percentage annually — protecting against under-insurance due to inflation.
Coverage for materials stored at locations other than the project site — manufacturer's warehouse, staging yard, transit storage facility. Standard EAR covers "site" only. Large projects often have equipment waiting at ports or warehouses for months before reaching site.
Extends basic RSMD (Riot, Strike, Malicious Damage) cover to include acts of terrorism. Essential for high-value infrastructure projects in sensitive locations, defence manufacturing facilities, and projects in areas with active civil unrest. Standard RSMD does not include terrorism.
Cranes, excavators, welding sets, generators, concrete mixers — the contractor's own heavy equipment used during erection. Covered as Item 2 of Section I at additional premium. Often covered on depreciated/Agreed Market Value rather than replacement value.
When critical equipment is damaged and normal sea freight would cause project delays, insurers can cover the extra cost of airfreighting replacement parts. Essential for time-critical power projects with contractual commissioning deadlines carrying penalty clauses.
For complex industrial projects — chemical plants, refineries, nuclear facilities — where testing and commissioning takes months beyond the standard policy period. Extension covers the testing phase beyond the originally stipulated project period.
Peninsular India, parts of South India. Lower earthquake risk. Extension optional.
Western India, parts of UP, Bihar, Orissa. Moderate risk. Extension recommended.
Delhi, most of UP, HP, J&K, Uttarakhand, parts of NE. Extension ESSENTIAL.
NE India (all states), Kashmir Valley, Kangra. Maximum risk. Extension MANDATORY.
Power· Renewable· Oil & Gas· Manufacturing· T&D· Pharma· Data Centers
EAR insurance covers any project involving the erection, installation, testing, and commissioning of machinery, plant, and equipment. From a small food processing unit to India's largest power stations — all are covered under the same EAR product structure.
Thermal, hydro, gas, nuclear power stations. Turbine installation, boiler erection, generator commissioning. NTPC, Adani Power, Tata Power. T&C phase is highest risk.
Solar panel installation, inverter, cabling, monitoring. Wind turbine erection, nacelle installation, blade fitting. India: 500 GW target by 2030 — every installation needs EAR.
Refinery equipment, LPG plants, compressor stations, gas pipelines. ONGC, Reliance, HPCL, BPCL. Chemical leakage during first pressurisation is a major EAR peril.
Blast furnaces, rolling mills, steel structure fabrication, conveyor systems. JSW, Tata Steel, SAIL expansions. High crane usage during erection phase.
Reactors, distillation columns, pressure vessels. Chemical leakage during testing is a confirmed EAR claim cause. Pharma API plants, bulk drug manufacturing.
Cement kilns, clinker plants, ball mills, raw material handling systems. Heavy rotating machinery — high risk during commissioning. Major players: UltraTech, ACC, Ambuja.
Assembly line installation, robotic welding systems, paint shops, engine plants. Maruti, Hyundai, Tata Motors new plant expansions. High-precision equipment erection.
Food processing plants, sugar mills, dairy processing, grain handling systems. Smaller SI range but still significant. Paper mills, textile spinning plants also covered.
Transmission lines, substations, switchgear, transformers. PGCIL, state DISCOMs. Substation commissioning — high-voltage switchgear testing is highest risk moment.
MRI machines, CT scanners, linear accelerators, OT equipment. Specialized high-value equipment — delicate and extremely expensive. Any installation error = massive loss.
Water treatment plants, sewage treatment, desalination plants, pumping stations. Government and PPP infrastructure projects. Jal Jeevan Mission projects across India.
Server infrastructure, cooling systems, power backup (UPS, DG sets, electrical). Growing rapidly with India's cloud boom. Hyperscaler data centers — Adani, Amazon, Microsoft, Google facilities.
SI = Contract Value + Customs Duty + Freight + Debris Removal + CPE
EAR Sum Insured follows a specific formula confirmed from Insurance and "Total contract value of the project — full reinstatement/replacement value including cost of erection, plant and machinery, customs duty and freight charges." Under-insuring leads to proportional claims reduction (average clause).
⚠️ INDICATIVE ONLY. Actual the insurer premium depends on project type, risk profile, and specific covers chosen. SI formula: Contract Value + Customs Duty + Freight + Debris Removal (5–10%) + CPE. TP limit per standard: max(10% of SI, ₹25 Cr). "For project value exceeding ₹1,500 crore, specially designed policies are available." — the insurer (sister PSU). Call 022 4302 0000 for exact the insurer EAR premium.
the insurer's Two Sister Engineering Products
EAR (Erection All Risk) and CAR (Contractor's All Risk) are the insurer's two Engineering insurance products. They serve different project types — EAR for mechanical/electrical/industrial, CAR for civil construction. Many large projects require both.
| Feature | ⚙️ EAR — Erection All Risk | 🏗️ CAR — Contractor's All Risk |
|---|---|---|
| Project Type | Mechanical / Electrical / Industrial | Civil / Structural Construction |
| Dominant Work | Machine installation, plant erection | Concrete works, civil structures |
| Examples | Power plant, refinery, factory, solar farm | Bridge, building, dam, road, airport |
| Testing Phase | Critical — highest risk — fully covered | Minimal — brief structural testing |
| SI Basis | Contract + customs + freight + CPE | Civil works value + material costs |
| DLP Period | 12–24 months (critical for machinery) | 12 months (standard) |
| Dominant Risk | Electrical failure, explosion, human error | Collapse, flooding, earthworks failure |
| Typical Contractor | BHEL, L&T Engineering, Siemens, ABB | L&T Construction, DLF, NCC, IRCON |
| the insurer Product | EAR Insurance (this page) | Contractor's All Risk (CAR) |
A large power plant project typically involves BOTH EAR and CAR simultaneously. The civil contractor building the turbine hall foundations needs CAR insurance. The mechanical contractor erecting the turbines inside the hall needs EAR insurance. For EPC (Engineering, Procurement, Construction) contracts covering both civil and mechanical work, a combined or back-to-back EAR + CAR policy arrangement is standard. Call 022 4302 0000 — our engineering insurance specialists can structure the most cost-efficient combined coverage for your project.
from the insurer's Own Policy Page + Multiple Sources
The EAR policy is written on an "all risks" basis — what it DOESN'T cover is more important than what it does. The exclusion list is shorter than a named-perils policy's coverage list. "War and nuclear perils, wear and tear, gradual deterioration, Damage due to faulty design, Consequential loss."
War, invasion, acts of foreign enemy, civil war, rebellion, revolution, military operations. Standard across all engineering insurance products. Terrorism extension available separately.
Damage from nuclear reaction, radioactive contamination, ionizing radiation. Nuclear plants themselves can use EAR for conventional (non-nuclear) equipment, but nuclear perils are excluded.
Normal aging of equipment, rust, corrosion, oxidation, gradual deterioration. EAR covers SUDDEN and UNFORESEEN losses — not gradual degradation from use.
"Damage due to faulty design, defective materials or castings, bad workmanship — limited to items immediately affected only." Key nuance: damage to OTHER items CAUSED by the faulty item is COVERED. Only the faulty item itself is excluded.
"Cost of rectification or correction of any error during erection NOT resulting in physical loss or damage." If an erection error is corrected without any physical damage, the correction cost is not covered. Physical loss must occur for a claim.
"Consequential loss/liability of any kind." Loss of production, revenue loss from project delay, contract penalty clauses, delay damages — all excluded. A separate Delay in Start-Up (DSU) or ALOP policy covers consequential loss.
Loss or damage to files, drawings, accounts, bills, currency, securities. Physical equipment is covered — paper and digital records are not. Separate cyber/data insurance for digital records.
Damages or penalties on account of non-fulfillment of terms of delivery. Contractual penalties for late commissioning are consequential losses — excluded. DSU/ALOP insurance covers this.
Loss arising from cessation of work — whether total or partial. If the project is abandoned, halted, or put on hold by the insured, losses arising from that stoppage are not covered.
Each claim has a deductible (excess) as specified in the policy schedule. The deductible is borne by the insured for each and every claim. Higher deductibles reduce premium.
Section II (TPL) excludes property already covered under Section I. A contractor cannot claim under Section II for damage to their own equipment — that's a Section I claim.
Section II excludes bodily injury to the insured's own employees, workers, and their families. Workmen's Compensation Insurance covers employee injuries separately.
After an EAR Incident — Act Immediately
EAR claims must be notified immediately. The surveyor's assessment is critical — early notification allows the surveyor to inspect damage before repair begins, establishing the loss quantum accurately. Never commence repairs without surveyor approval for major claims.
"Take necessary steps to minimise the loss." Stop the source of damage (isolate electrical, shut process valves). Preserve evidence — don't move or repair anything significant before the surveyor visits. Photograph comprehensively from multiple angles immediately after the incident.
"Inform fire brigade in case of fire and police authorities in case of theft." For testing/commissioning incidents involving explosion or fire: emergency services first. For theft: FIR within 24 hours mandatory for claim. For third-party injury: police FIR is essential for Section II claim.
Notify the insurer or your broker (022 4302 0000) immediately after the incident. Policy condition: prompt notification. Provide: policy number, date/time/location of incident, nature and preliminary extent of damage, whether any third-party injury or property damage occurred (for Section II).
"Extend full cooperation to the surveyor deputed by the company." the insurer appoints an engineering surveyor — often a specialist loss adjuster for large EAR claims. The surveyor assesses: cause of loss, extent of damage, repair vs replacement, and quantum of loss. Do not commence major repairs before surveyor approval.
Compile: Claim form, policy schedule, repair estimates from OEM/authorized repair centre, purchase invoices for damaged equipment, FIR (if applicable), surveyor's interim report, project schedule (showing delay impact), test reports confirming damage extent. For large claims: engage a public loss adjuster to assist.
Settlement basis: Cost of repair (for repairable damage) or replacement value (for total loss) — subject to policy excess and any under-insurance. For Section II: the insurer settles with the third party on your behalf. DLP claims: must prove damage was caused during erection period. Large claims may involve multiple surveys and interim payments.
Engineering Insurance Questions
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