Engineering Insurance in Malaysia

The main types of engineering insurance

Engineering insurance is a group of policies for construction, installation and heavy-equipment risks that ordinary property cover does not address. The right policy depends on what you are doing:

• Contractors all risk (CAR): civil and building works such as buildings, roads and bridges. It covers physical loss or damage to the works, plant and materials during construction, and usually includes third-party liability for injury or property damage caused by the project.
• Erection all risk (EAR): installing machinery, plant and steel structures. It covers loss or damage to the equipment while it is being erected, and usually through testing and commissioning.
• Contractors plant and machinery: the cranes, excavators, bulldozers and other heavy equipment you use on site. It covers accidental damage, theft, fire and natural perils, subject to the policy terms.
• Civil engineering completed risks (CECR): completed structures such as highways, roads, bridges, tunnels and dams. It covers material damage to the structure after completion, and only the cost of repair is paid.

Which one fits? As a rule of thumb, if the project is mostly structural construction, look at CAR. If it is mostly installing machinery, electrical equipment or steel, look at EAR. Some projects, such as a new factory, involve both, and your broker can arrange them together.

What CAR and EAR typically cover

• Fire, lightning and explosion
• Theft and vandalism at the site
• Accidental damage, including mistakes made during construction or installation
• Natural perils such as flood and earthquake, subject to the policy
• Testing and commissioning, for EAR policies that include it
• Third-party liability for injury or damage to others arising from the works, as part of CAR or as an option on EAR

Exact inclusions vary by insurer and project, so the schedule and wording on your own policy decide what is covered. Check the testing and commissioning period and any limits on design-related damage.

Common exclusions

• Normal wear and tear, gradual deterioration and rust
• Defective design, materials or workmanship (the cost of correcting them, although resulting damage is often treated separately)
• Liability assumed under an agreement
• Liability under workers compensation law
• Loss or damage to your own property or property in your care and control, under the liability section
• Pure financial loss, fines and penalties
• War, terrorism and nuclear risks
• Loss that happened before the policy started

Contractors owned equipment such as cranes belongs under plant and machinery cover, not under CAR or EAR.

Who typically needs it

• Contractors and subcontractors on construction projects
• Companies installing production lines, boilers, lifts, generators or steel structures
• Project owners and developers, where the contract asks for the project to be insured
• Contractors who own cranes, excavators and other site equipment
• Owners and operators of completed roads, bridges and similar structures

Many contracts require CAR or EAR before work starts, and lenders or main contractors often ask for proof of cover. Who arranges the policy, the owner or the contractor, depends on the contract. Either may take it out, sometimes in joint names, so read your contract carefully.

How engineering insurance fits with your other cover

• Injury to workers: not part of CAR or EAR. See workmen's compensation insurance.
• Equipment in transit to site: usually under cargo cover rather than CAR or EAR. See marine cargo insurance.
• Liability to third parties: see public liability and CGL insurance. For subcontractor questions, read does CGL cover a contractors subcontractors.
• Your own premises and stock: see fire, burglary and all-risk insurance.

Our business insurance in Malaysia overview explains how these fit together.

What insurers look at

Insurers generally consider the type and value of the project, the contract period, the site and its surroundings, the machinery or works involved, the contract terms and your claims history. A detailed project description helps get a more accurate quote.

How Cover Buddies helps

We are an insurance broker. We compare options and set up the right engineering policy for your project, so you deal with one team instead of several insurers. To get a quote, it helps to have:

• What the project involves, and whether it is construction, installation or both
• The contract value and the sum to be insured
• The project start date and period, including testing and commissioning
• The site location
• A list of plant and machinery, if you want equipment insured
• What the contract requires, and any past claims

Common questions

What is the difference between CAR and EAR?

CAR is designed for civil and building works. EAR is designed for installing machinery, plant and steel structures. Some projects need both.

Who takes out the policy, the owner or the contractor?

It depends on the contract. Either may arrange it, sometimes in joint names.

Does it cover injury to workers?

No. Worker injury falls under workmen's compensation, and SOCSO also applies.

Does it cover equipment being transported to the site?

Usually not. Transport is generally covered under marine cargo or goods-in-transit cover. Check your arrangements.

Can I insure my own cranes and excavators?

Yes, under contractors plant and machinery cover. The sum insured should reflect the cost of replacing the equipment. For equipment used away from a construction site, ask us about all-risk cover instead.

Does it cover a project after it is completed?

CAR and EAR cover the construction or installation period. For completed civil structures such as roads, bridges and tunnels, civil engineering completed risks cover applies.

Read more: Decoding Contractors All Risks Insurance | Erection All Risk Insurance for Machinery Installation Projects | Erection All Risk Explained: When Does a Contractor Need It? | Plant and Equipment Insurance for Construction | Insurance for Completed Civil Engineering Projects

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