Erection All Risk Insurance Explained: When Does a Contractor Need It?

The short answer

Erection all risk (EAR) insurance covers loss or damage to machinery, plant and steel structures while they are being installed, tested and commissioned. A contractor needs it when the project is mainly about erecting or installing equipment rather than building a structure. It is the sister policy to contractors all risk (CAR), which is designed for civil and building works.

What is erection all risk insurance?

Installing a production line, a boiler, a lift or a steel frame comes with risks that normal property cover does not address: equipment dropped during lifting, damage in testing, faulty workmanship, theft from site and more. EAR covers physical loss or damage to the insured works during the erection period, and usually the testing period too, subject to policy terms.

What does it usually cover?

• Machinery, plant and equipment being installed
• Steel and structural erection works
• Materials and components on site
• Damage from accidents during lifting, installation or testing
• Fire, theft and certain natural perils
• Optional third-party liability for injury or damage to others arising from the works

Exact inclusions vary by insurer and project, so confirm the testing and commissioning period and any limits on design-related damage in the policy wording.

What is usually excluded?

• Normal wear, tear and gradual deterioration
• Correcting faulty workmanship or materials themselves, with resulting damage often treated separately
• Delay and loss of profit, unless extended
• Equipment owned by the contractor, such as cranes, which belongs under contractors plant cover
• Deliberate acts

EAR vs CAR: which one?

• Contractors all risk (CAR): civil and building works such as buildings, roads and bridges
• Erection all risk (EAR): installation of machinery, plant and steel structures

Some projects have both elements, for example a factory with building works and machinery installation. Your broker can arrange a combined approach. Read more in our article decoding contractors all risks insurance.

When does a contractor need EAR?

• When the main contract involves installing plant, machinery or steel structures
• When the project owner, lender or main contractor requires it
• When the equipment being installed is of high value
• When you are responsible for the equipment until handover

Common questions

Who takes out the policy: the owner or the contractor?
It depends on the contract. Either may arrange it, sometimes in joint names. Read your contract carefully.

Does it cover the transport of equipment to site?
Usually not. That is generally under marine cargo or goods in transit cover. Check your arrangements.

Does it cover injury to workers?
No. Worker injury falls under employee injury protection and workers' compensation style cover. See workmen's compensation.

Related reading

For a shorter overview, see Erection All Risk Insurance for Machinery Installation Projects.

Hear it from David Teh

For a quick overview of the main types of business insurance, founder David Teh walks through the coverage types found on SME packages in under 20 minutes on the Cover Buddies Podcast. Read the episode page, listen on Apple Podcasts or Spotify, or watch on YouTube.

Work with Cover Buddies Today!

Taking on an installation project? Cover Buddies can help you check what the contract requires and what cover fits. Explore Commercial Insurance, get a quote or WhatsApp us.