What is Erection Insurance?
Erection Insurance (EAR) is an All Risks Insurance covering all kinds of sudden and unexpected damages which can affect the preparation materials or erection-related equipment or construction machinery on the construction site, with reference to the works carried out up to that moment or to be carried out later on during the execution of an erection project.
The term of coverage starts from the moment the erection materials are brought to the erection site and expires with the operationalization of the erected machinery, once testing is completed. During that timeframe, numerous material damages can arise due to technical or human-related reasons. MAPFRE SİGORTA Erection All Risks Insurance provides coverage against any sudden and unexpected risk which may arise during the erection of machinery and equipment, as well as during testing following erection.
Which erection works can be covered under Erection Insurance?
The machinery and equipment to be erected to render the site operational can be covered under the present insurance. The machinery to be erected may be mechanical or electronic. Furthermore, the assembly of electricity, pipe, heating-ventilation installations, electrics and pipe lines, etc. can also be covered with this product. This insurance type with a very extensive area of application even covers construction works required as a result of erection operations.
How can I get Erection Insurance?
Once you contact the nearest agency, fill out our survey form and submit the documents required for the Erection Insurance (project documents, etc.). The case will be analyzed by our specialists and the conclusion will be reported to you as soon as possible.
Which parties are Insured with Erection Insurances?
Principal (General Owner of the Project): he party supplying the insured construction site, which is often engaged in the planning stage and the supply of materials for certain projects. The principal is the ultimate beneficiary.
Primary Contractor: The party appointed by the principal to assume responsibility for the whole project’s construction and/or erection works. It can assign part of the work to subcontractors. The Policy Holder is the primary contractor.
Secondary Contractors (Subcontractors): The party that assumes the whole (turnkey) or part of a construction and/or erection business, and which is appointed either directly by the principal or by the primary contractor.
When does the Erection Insurance (EAR) start? What are its stages?
The insurance starts with the delivery of the initial preparatory materials at the construction site. It then ends with the completion of the works and the delivery to the principal. Furthermore, the four-week testing and trial stage is also covered by EAR Insurances.
In some cases, the contractor cannot deliver all the works undertaken. However, such incomplete sections concern details that will not affect the commencement of the use or the operationalization of the construction or erection (e.g. the boiler connections). In such cases, if the control engineers the insured have appointed approve so, and if the construction agreement contains a provision on this matter, the provisional acceptance shall apply. In this context, the contractor will complete the remaining works, followed by the final acceptance procedure.
How is the sum insured set for Erection Insurance?
The sum insured under Erection Insurances should be set with reference to the value as of the completion of the work. In other words, the sum insured refers to the project price. Often the price is a matter of confusion. In order to prevent such confusion, the tender price can be taken into consideration when setting the sum insured. However, in long-term policies, that figure can be rendered insufficient in time and is often eroded by inflation. That is why, in order to protect larger construction projects against the risk of underinsurance it always makes sense to insure yourself in a foreign currency.
What are the supplementary coverage elements which can be extended alongside Erection Insurances?
- Third party liability
- Construction/erection machinery
- Debris removal
- Provisional construction site facilities and equipment
- Strikes, lock-outs, commotion, public disturbances and acts of terrorism
- Express shipping, overtime, leave-pay and raises
- Extended maintenance
What is the scope and features of Third Party Financial Liability supplementary coverage?
Provides coverage for any damage/injury that may be caused to third parties other than parties involved in the construction and/or erection works (e.g. a person who happens to be passing by the construction site, a child wandering unauthorized into the construction site, a vehicle parked right by the construction site) or their property. It should be explicitly stated that this insurance element does not cover second parties who work or are employed in construction and erection works. Employees can be covered only by the Employer’s Financial Liability Insurance policy issued on an annual basis.
What are the leading risks covered by Erection Insurances?
- Damages caused during fire, lightning, explosions, and firefighting efforts
- Floods, flooding, rain, snow, sea waves
- Airplane impacts, parts falling off airplanes
- Landslides, land subsidence, and rockfall
- Theft and attempted theft
- Damages caused by humans (carelessness, negligence, etc.)
- Electrical damages (short-circuit, spark, arcs, etc.)
- Operational accidents
What is the scope and characteristics of the Construction Machinery Supplementary Coverage?
It provides assurance against damages which may be inflicted on fixed or mobile construction machinery in the construction and/or erection site and which arise due to a cause covered by erection insurances. This coverage should not be confused with that of Machinery Breakdown Insurance. The difference is that Machinery Breakdown covers the operation of the machine and mechanical damages, whereas Construction Machineries Supplementary Coverage applies only for physical damages (e.g. flood, fire, theft), rather than mechanical failures. This coverage is extended to excavators, bulldozers, tower cranes, cylinders, asphalt machinery, etc. rather than to small tools, motors, cables and cords, decks.
What is the scope and characteristics of the Debris Removal Supplementary Coverage?
Should a formwork collapse during construction and/or erection work, the insured will be required to expend an additional amount for the removal of the debris. Debris can also be silt and soil brought about by the flooding of a site. Such expenses are covered by the Debris Removal Supplementary Coverage. However, as a rule, debris should be created by a reason covered by the insurance.
What is the scope and features of the Provisional Construction Site and Equipments Supplementary Coverage?
It provides coverage against damages to directly related equipment (decks, formwork, etc.) or constructions that are not directly related (workshops, worker barracks, cafeterias, etc.) with the performance of the works during construction/erection. This equipments will be added onto the cost of construction, taking wear and tear into account.
What is the scope and characteristics of the strikes, lock-outs, commotion, public disturbances and acts of terrorism coverage?
This coverage element may be purchased to insure against collective labor agreements, strikes, or corresponding lock-outs during construction works, or damages arising due to civil commotion or acts of terrorism.
What is the scope and characteristics of the express shipping, overtime, leave-pay and raises supplementary coverage?
This supplementary coverage element can be purchased to cover additional costs (rapid shipment, costs for unordinary work, etc.) that may arise in the recovery of damages to preparatory materials and machinery used in construction or erection works and to minimize the delays which may be caused by the damage.
What is the scope and characteristics of the Extended Maintenance Supplementary Coverage?
If the agreement contains a provision to that effect, part of the works can be subjected to provisional acceptance with the approval of the principal’s control engineers. This procedure applies in cases where almost all the works are completed, with only work which would not affect the operation of the project remaining. During the provisional acceptance and final acceptance, the contractor will be expected to meet its obligations. Even though the project is considered to have been delivered in general by this stage, certain damages may arise during the performance of the works and the contractor would nonetheless be considered responsible. In order to meet these damages, an extended maintenance supplementary coverage can be purchased for the period between the provisional acceptance and the final acceptance. During the said timeframe, only the damages for which the contractor is liable shall be covered (i.e. natural disasters shall be excluded).
Which risks are not covered in Erection Insurances?
- Damages for which the manufacturer is liable
- Damages covered by the Machinery Breakdown Insurance regarding Construction/Erection machines (construction machinery, etc.)
- Damages caused by wear, tear and corrosion
- Other exceptions stipulated in the General Terms and Conditions
What is the difference between the Construction Insurance (CAR) and Erection Insurance (EAR)?
Often projects entailing both construction and erection works may present some difficulty in terms of the answer to the question of which type of insurance is applicable. For instance, while the body fill and other concrete works in a dam construction project are covered by CAR insurance, the turbine installations may be considered under EAR coverage. In such cases the insurer will consider the branch that accounts for more than 50% of the overall figure as the applicable branch. The area of application of CAR insurance is very extensive, therefore it is recognized and more in demand. However, it is possible to include construction works in an erection insurance policy as well. For instance, EAR Insurance can provide coverage for the building of a plant on an unoccupied piece of land, alongside the erection of the machinery to be operated in the plant later on. EAR Insurance covers a test/experimental stage following the completion of the erection works as well (4 weeks as per the General Terms and Conditions of Erection Insurance). This timeframe entails the testing of the installed machinery to see if it is operational. That timeframe can be considered the highest risk and damage-prone part of the whole work.
How is Erection Insurance assessed? Which pieces of information are required to enable the extension of the accurate price?
Each project has its own unique characteristics. These may arise to an extent that all technical characteristics of a construction project are affected. Therefore:
- It is crucial to get detailed information about the insured and the policy holder and to investigate their experience levels.
- A clear definition of the work and technical specifications, if possible, for the work to be performed, will make the process much easier. In addition, at the least the procurement of the project of the work and a layout plan will play a crucial role in terms of enabling the pricing specialist to understand the anticipated risks.
- The distribution of the prices applicable to each preparation item for the work also plays a role in the wider picture of pricing.
- The timeframe the work will cover, the requirement of an extended maintenance term or not, and the length of such extended maintenance term, if any, will play a crucial role.
- Considering the fact that natural disasters are covered by the insurance, it is crucial to get detailed information regarding the risk of the address. Is the site far from flooding risks? Have any earthquakes occurred in this region previously? Do winter months see frost temperatures? Do any special circumstances apply in terms of storms?
- What are the characteristics of the surface and the building features of the construction?
- Other factors to take into account arise in the form of any security measures regarding the construction site, employment of guards and sufficient levels of lighting.
- The deepest level the excavation works will reach for construction works, or the weight of the heaviest machine, as well as the most expensive machines for erection works should be specified.
- If a supplementary coverage for third party financial liability is required, the characteristics and distance of the buildings nearest to the construction site are also crucial.
- In case of a specific risk, the high-tech nature of the building involved will also play an important role.
* Many other questions in addition to those noted above can be asked to enable the insurer to assess the risk with reference to the type of construction or erection works.
Can Erection Insurances be renewed?
Renewals cannot be made because the policy term will expire once the construction is completed. However, term extensions can be granted. In such cases a term extension document is issued.
Are there cases where a test-experience period is not extended in Erection Insurances?
A test-experience period is not covered for the erection of second-hand machinery.
Is there the chance to get premium returns on policies for erection projects completed before the previously stipulated term?
The purpose of erection insurances is to ensure the completion of the work as if no claim has occurred, and, in this context, to protect the Insured against any claims which may arise during the performance of the work. Such insurances do not provide annual risk coverage and are not essentially time-limited insurances effected for specific timeframes like fire or motor insurances. That is why the completion of the work necessitates the termination of the policy as well. However, no premium will be returned in case of early completion of the work.