Due to technological advances, companies are finding that machinery breakdown insurance is an essential component of any well-rounded insurance program.All types of machinery, plant, mechanical equipment and apparatus may be covered under the machinery breakdown insurance.Power generating units (boilers, turbines, generators), power distribution plants (transformers, high & low tensions equipment) as well as production machinery and auxiliary equipment (machine tools, weaving looms, paper machines, kneaders, pumps, compressors, pipes, tubes, etc) can be covered under this policy.This policy is extremely important for everyone who operates machinery. Large enterprises using large units and fully automated production plants definitely need to be covered under this policy. 

Besides, medium-sized and small enterprises also need this policy since a single machine failure at a crucial time may have serious financial and economic consequences. 

It covers unforeseen and sudden physical losses or damages to the insured items necessitating their repair and/ or replacement.

Faulty design faults at the workshop or in erection, defects in casting and materials are also insured. Usually, such faults are discovered after the manufacturer\'s guarantee has expired and there is no possibility of recourse. 

Faulty operation, failure of safety systems, lubrication systems, control systems, lack of skill, negligence are also insured. 

Tearing apart on account of centrifugal force, despite not being a very frequent cause can still result in heavy damage to the machine and the surrounding area. Losses occurring due to short circuits, excess voltage, defective insulation, corona discharge and mechanical stress are also insured. 

Overheating of the tubing resultant in destruction of entire piping system is also an insurable risk.


In event of damage that can be repaired, the expenses incurred for restoring the damaged machinery to its working condition prior to damage will be paid by the insurer. 

If repairs are executed at a workshop owned by the insured, the insurer will pay the cost of materials and wages incurred for the purpose of repairs plus a reasonable percentage that covers the overhead charges. 

No deduction is made for depreciation of the parts replaced, unless they have a limited lifespan. However, the salvage value is always taken into account. 

If the cost of repairs is equal or exceeds the actual value of the machinery insured, then the settlement is made on a Total Loss Basis

In this case, the company will pay the actual value of the insured item immediately, including the costs for ordinary freight, erection and customs duties if they were included in the Capital Sum Insured. 

The actual value is calculated by deducting proper depreciation from the replacement value of the item. 

The company will also pay any normal charges for dismantling of the machinery destroyed, but the salvage value is always accounted for. 

Extra charges such as overtime, public holidays over time, night work over time, express freight, etc are also payable if they have been insured specifically. 

However the cost of any alterations, improvements or overhauls is not recoverable under the policy. 


The individual exclusions from the cover are listed in the machinery breakdown policy and mainly comprise loss or damage caused by:

  • Fire, lightning, chemical explosion, burglary and theft.
  • Wear and tear owing to ordinary use or operation as well as erosion, corrosion, etc.
  • War or warlike situations, civil commotion, strikes, etc.
  • Willful acts or gross negligence.
  • Faults or defects existing at the time of commencement of policy.
  • Losses covered by the manufacturer\'s warranty.
  • Nuclear radiation or reaction.

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