Protecting Every Turbine, Compressor and Motor — From Lubrication Failure to Short Circuit — Manufacturing· Power· Chemical· Steel —
Machinery Insurance (MBD), the insurer

the insurer's Machinery Insurance (also called Machinery Breakdown / MBD) covers both rotating and static industrial equipment against sudden, unforeseen mechanical and electrical breakdown — including human error.


"Machinery Insurance is against unforeseen and sudden physical damage to the insured machinery from causes such as: Defective lubrication, loosening of parts, molecular fatigue, self heating, explosion due to internal pressure, implosion due to external pressure or internal vacuum, abnormal stress, centrifugal force. Excessive electric pressure, failure of insulation, short circuit, open circuit, or arching including damage by internal fire so set up. Failure of connected machinery or protective devices. Lack of skill, carelessness or malice of persons, whether insured employee or not. Falling, impact, collision and the like."


"For a comprehensive cover for your plant & machinery, both Fire & Machinery insurance must be availed. Under machinery insurance policy, fire is exclusion & under fire insurance electrical/mechanical breakdown is exclusion."

In plain terms:
→ Fire Insurance: covers your machinery from external fire, flood, storm, earthquake — but NOT if it breaks down internally
→ MBD: covers your machinery from internal breakdown — but NOT from external fire or flood
→ Together: complete coverage


"Manufacturing, Industrial, Engineering, printing companies etc are the major buyers of this insurance." Any business where machines are essential to revenue generation needs MBD. The question isn't whether you can afford MBD — it's whether you can afford a week of unplanned downtime without it.

"Unforeseen and sudden" is the key MBD coverage trigger — and it matters enormously at claim time.

What "unforeseen and sudden" means:
→ SUDDEN: The damage happened quickly — not gradually over months
→ UNFORESEEN: The damage was not predictable from visible, known defects
→ PHYSICAL: There is actual damage to the machinery — not just functional malfunction
→ UNEXPECTED: The insured did not know this breakdown was coming

What this EXCLUDES:
Gradual deterioration that the maintenance team observed but ignored. A cracked bearing housing noticed in routine inspection but not repaired — if it eventually fails, MBD may reject the claim as "gradual development of abnormalities ignored despite knowing repair was needed."

Most common MBD claim causes in India:

1. Bearing failures (highest frequency): Vibration → bearing failure → shaft damage. Accounts for ~40% of rotating machinery claims in India.

2. Electrical insulation failure: High humidity, ageing insulation, voltage surges → motor/transformer burnout. Very common during monsoon season when humidity is highest.

3. Lubrication system failure: Oil pump failure → starved bearings → seizure. Critical for turbines and high-speed compressors. Often results in total loss of the machine.

4. Coupling failure: Misalignment causing coupling failure → vibration damage propagates to connected machinery. One failed coupling can trigger MBD claims on multiple connected machines.

5. Transformer failure: Insulation breakdown, oil contamination, voltage surges. High-value single-item claims. One power transformer = ₹5–100 Cr SI.

6. Turbine/compressor blade failure: Fatigue, foreign object ingestion, erosion. Rare but extremely high value (₹10–500 Cr repair cost).

Best practice:
Maintain detailed machine logs showing all inspections and repairs. This demonstrates that known defects were addressed (not ignored), supporting MBD claim admissibility.

MBD Sum Insured = Current New Replacement Value of equivalent machinery + freight + erection + customs.


"It is a requirement of this policy that the sum insured or value for which the particular machine is insured should be equal to the current new replacement value of the machinery (of the same kind and same capacity) including the freight, erection costs, customs duty if any."

SI formula:
SI = Current market price of equivalent NEW machine + International freight (if imported) + Customs duty + Erection/installation cost

Common SI mistakes:
→ DO NOT use purchase price (may be 5–10 years old — replacement cost has changed)
→ DO NOT use book/accounting value (depreciated — much lower than replacement cost)
→ DO NOT under-insure to save premium — Average Clause will reduce ALL claims proportionally

Average Clause warning:
"In case the sum insured is less than the current replacement cost, the claim will be paid only in such proportion as the sum insured bears to the current replacement cost." — the insurer. Example: Machine SI ₹50L, actual replacement cost ₹80L. A ₹20L partial loss = ₹20L × (50/80) = ₹12.5L settlement. Under-insurance cost: ₹7.5L on that one claim.

PARTIAL LOSS settlement:
Full cost of repair: replacement parts + labour + freight + customs + dismantling + reassembly. NO DEPRECIATION DEDUCTED. If a bearing costs ₹2L to replace — MBD pays ₹2L (plus freight, labour, dismantling). Complete restoration to pre-loss working condition.

TOTAL LOSS settlement:
Actual value immediately before loss = Replacement value MINUS depreciation. A 10-year-old turbine: replacement value ₹10 Cr, depreciation 35% = settlement ₹6.5 Cr. The insured must bridge the ₹3.5 Cr gap to buy a new turbine.

Call 022 4302 0000 for current SI valuation guidance for your specific machinery.

This is covered under MBD Insurance — NOT Fire Insurance. This is the single most important technical distinction in machinery insurance.


"Machinery breakdown insurance covers the loss or damage to the machinery due to fire, in the insured electric machines, where such loss is due to the fire originating from within the machinery and resultant fire damage to such machinery."

The scenario:
Turbine generator insulation deteriorates → electrical failure → short circuit → fire INSIDE the turbine → turbine destroyed.

MBD: ✅ COVERS this
The the insurer product page confirms: "Excessive electric pressure, failure of insulation, short circuit, open circuit, or arching including damage by internal fire so set up." The internal fire resulting from insulation failure is explicitly a covered MBD peril.

Fire Insurance: ❌ DOES NOT cover this
Fire Insurance excludes electrical/mechanical breakdown. The fact that it resulted in a fire does not change the cause — the cause was electrical insulation failure (a breakdown peril). Fire Insurance covers fire that COMES FROM OUTSIDE and damages the machinery.

The the insurer FAQ rule:
"Under machinery insurance policy, fire is exclusion & under fire insurance electrical/mechanical breakdown is exclusion."

If the turbine fire then spread to the turbine hall building:
→ Turbine itself: MBD claim ✅
→ Building damage from fire spreading: Fire Insurance claim ✅
→ Lost generation revenue during repair: MLOP claim ✅

This is exactly why "both Fire & Machinery insurance must be availed." Call 022 4302 0000 to ensure your plant has both policies correctly structured.

MLOP (Machinery Loss of Profit) is the essential companion policy to MBD — covering the financial loss that MBD doesn't cover.

The fundamental gap:
MBD covers the MACHINE (repair/replacement cost). MBD does NOT cover the FINANCIAL IMPACT of the machine being down — lost revenue, ongoing salaries, continuing overheads, penalty clauses.


→ Gross profit lost during the period the machinery is out of service
→ Standing charges: salaries, rent, interest, depreciation — costs that continue even when production stops
→ Increased cost of working: overtime, outsourcing, emergency alternative arrangements

Concrete example:
Paper mill's pulp digester breaks down. Repair: 6 weeks (42 days).
MBD pays: ₹45 lakh repair cost ✅
MLOP pays: ₹3.2 crore gross profit lost (₹7.6L/day × 42 days) ✅
Without MLOP: ₹3.2 crore business loss — zero insurance protection.

MLOP key terms:
→ SI: Annual Gross Profit × (Indemnity Period months / 12)
→ Indemnity period: 3/6/12/18/24 months — choose based on maximum repair time for your most critical machine
→ Trigger: MLOP only pays if MBD pays (the machine damage must be an admissible MBD claim)
→ MLOP requires an active MBD policy — cannot be purchased standalone


Goodwill/reputation loss, customer loss, intangible losses, penalties under pre-existing contracts, restrictions imposed by authorities.

For most manufacturing operations, MLOP exposure (lost profits) is 3–15× larger than MBD exposure (repair cost). Yet most companies only buy MBD. Call 022 4302 0000 to calculate your MLOP SI requirement.

You CAN choose which machines to insure under MBD — but doing so requires careful thought about adverse selection risk.


"It is optional to insure all machines under an MBD policy. Insured customers can decide on what types of machines to insure and which ones to exclude."

BUT — the adverse selection warning:
"This could lead to adverse selection as the insured might not be able to predict which machine would be damaged under what circumstances. There could be reasons for not insuring a few machines, such as the age of the machines, which is above the desired limit for insurance; in such cases, the adverse selection would not apply."

The critical rule — partial coverage of ONE machine is NOT allowed:
"A machine should be insured as a whole, and the insured is allowed to insure only a particular machine and not every machine in his/her workshop." You can choose WHICH MACHINES to insure, but each chosen machine must be insured in its ENTIRETY. You cannot insure 50% of a turbine or cover only the electrical components of a compressor — the entire machine must be covered.

Why partial selection creates risk:
If you insure only your critical machines and leave others uninsured, a breakdown on an uninsured machine can cascade into an insured machine (connected machinery failure) — the insured machine's damage may be covered, but the recovery is complicated.

Old machinery exception:
If machines over 15 years are excluded by the insurer due to age, that's a legitimate exclusion — not adverse selection. The insurer may decline those specific machines or offer them with special terms and higher premium.

Call 022 4302 0000 — we'll help you identify which machines are most critical and structure your MBD schedule optimally.

Stand-by equipment discount is the only premium incentive based on operational redundancy in the entire 50+ product series — and it can halve your MBD premium on eligible machines.


"Stand-by equipment means those that could work as an alternative to the machinery in case of damage, and this doesn't include the DG set of the insured. For stand-by equipment, a 50% discount on tariff rates could be applied by the insurer."

How it works:
If you have a backup/standby machine that can take over production while the primary machine is being repaired, the insurer recognises that a breakdown does NOT stop your operations. The risk profile is lower → 50% discount on the tariff premium rate.

Example:
Primary compressor SI: ₹2 Cr. Tariff premium (indicative): 0.5% = ₹1L/year. With stand-by compressor available: 50% discount → ₹50,000/year. Annual saving: ₹50,000.

What qualifies as stand-by:
→ A separate machine of same type and capacity that is maintained and ready to operate
→ Must be capable of performing the same function as the primary insured machine
→ Must be available at the same premises (or quickly deployable)

What does NOT qualify as stand-by:
"This doesn't include the DG set of the insured." A diesel generator does not qualify as stand-by for a motor or compressor — it's a separate utility, not a functional equivalent.

Important note:
The discount is on TARIFF rate. Some machines may not have a standard tariff rate — the discount is negotiated. The insurer needs to verify the stand-by is genuinely available and functional. Call 022 4302 0000 to confirm if your stand-by equipment qualifies.

YES — a 12-year-old machine can typically be covered under MBD, though with higher premiums and possible special conditions.


"Insurers might not accept machines that are more than 15 years old in some cases, and therefore, those machines may be excluded. The reason for exclusion could be that those machines have come to the end of their life cycle."

At 12 years:
Most the insurer underwriters will cover a 12-year-old machine, but expect:
→ Higher premium rate than a new machine (reflects higher breakdown probability)
→ Pre-insurance inspection may be required
→ Higher depreciation rate applied to total loss settlement (typically 35–40% for 10–15 year old machinery)
→ Some condition-based exclusions (specific known defects identified at inspection)

The 15-year threshold:
At 15+ years, the machine may be at or near the end of its economic life cycle. Some insurers will decline or require:
→ Detailed condition report from a qualified engineer
→ Evidence of regular maintenance and recent overhaul
→ Significantly higher premiums
→ Exclusion of specific aged components

What you can do for an ageing machine:
1. Conduct a professional condition assessment — this supports the MBD application
2. Ensure maintenance records are complete and up to date
3. Consider recent overhaul/refurbishment — this resets risk perception
4. Accept higher depreciation on total loss SI — this is appropriate for an aged machine

Practical advice:
Don't simply declare original purchase price as SI. A 12-year-old machine has a current replacement cost AND a depreciated actual value. SI = current replacement cost of equivalent NEW machine. Total loss settlement = replacement cost minus ~35% depreciation. Call 022 4302 0000 for an assessment.

The three most commonly missed MBD exclusions — each causing claim rejection surprises.

1. Gradual deterioration that was "known but ignored":
"Gradual development of abnormalities, defects, cracks etc. in any part being ignored regularly in spite of knowing it demands repair."
This is the most commonly disputed MBD exclusion. If your maintenance log shows a bearing vibration was noted 3 months before it failed catastrophically, the insurer may argue the failure was foreseeable and not "unforeseen." Best practice: act on maintenance findings promptly, and document the action taken.

2. Chemical recovery boiler explosion exclusion:
"Explosions in chemical recovery boilers — other than pressure explosions." — the insurer/ confirmed.
Paper and pulp mills use chemical recovery boilers (Tomlinson boilers) that process black liquor (a chemical mixture). These boilers are specifically excluded from explosion cover in MBD due to their unique chemical explosion risk profile — different from normal pressure explosions. Only PRESSURE explosions in these boilers are covered; chemical explosions are not. Paper mill operators: verify your specific boiler type and ensure separate coverage if needed.

3. DG Set is NOT stand-by equipment:
If you've been claiming a 50% stand-by discount because "we have a DG set," this discount may be invalid. "Stand-by means those that could work as an alternative to the machinery in case of damage — this doesn't include the DG set." A DG set powers the factory during grid failure; it does not function as stand-by for a broken compressor or turbine.

Other commonly missed exclusions:
→ Application software on process control computers (covered by EEI Section II, not MBD)
→ Consumable parts on standalone basis (belts, seals, dies — only covered when their failure damages the main machine)
→ Damage during movement OUTSIDE the premises (only movements WITHIN premises are covered)
→ Overload experiment damage (normal production overload IS covered; deliberate test overloading is NOT)

MBD has two distinct settlement paths — and understanding both before a claim occurs helps you choose the right SI and manage depreciation provisions.

The 5-step claim process:

Step 1 — Notify Immediately: Contact the insurer/Probitas (022 4302 0000) within 24–48 hours. Provide machine details, date, description of breakdown. Begin taking all reasonable steps to prevent further damage.

Step 2 — Preserve & Document: Photograph all visible damage. DO NOT discard damaged parts — they are surveyor evidence. For urgent safety repairs: call insurer first for telephonic approval.

Step 3 — Surveyor Inspection: the insurer appoints a surveyor. Provide full cooperation and site access. Surveyor determines: (a) Is this an admissible MBD peril? (b) Partial or total loss? (c) Claim amount.

Step 4 — Submit Documents: Claim form, policy, purchase invoice, maintenance records, repair estimate from OEM/authorised workshop (not just any workshop), surveyor's report.

Step 5 — Settlement.

PARTIAL LOSS settlement (most MBD claims):
→ Full cost of parts + labour + freight + customs + dismantling + reassembly
→ NO depreciation deducted
→ Complete restoration to pre-breakdown condition
→ Example: Bearing + shaft replacement on compressor: parts ₹8L + freight ₹1L + labour ₹2L + dismantling/assembly ₹3L = ₹14L total claim → MBD pays ₹14L (subject to excess)

TOTAL LOSS settlement (irreparable or repair cost > machine value):
→ Replacement value MINUS applicable depreciation
→ 5-year machine: -10% depreciation. 10-year machine: -20-35% depreciation. 15+ year machine: -40-50%
→ Example: 10-year-old turbine replacement value ₹10 Cr, 35% depreciation = ₹6.5 Cr settlement
→ Salvage value of damaged machine deducted from settlement
→ After payment: SI reduced by claim amount; pay additional premium to reinstate

Key rule:
Always insure at CURRENT REPLACEMENT VALUE (new machine, same specs) — not book value. The Average Clause proportionally reduces ALL claims if you're under-insured. Call 022 4302 0000 for a current SI review.