Answer to Question #155699 in Management for Prabhdeep

Question #155699

Explain with rationale the special underwriting consideration while deciding rates, terms and conditions for machinery breakdown insurance?( please answer in 200 to 250 words)

Expert's answer


Machinery Breakdown is a policy designed to provide coverage for the plant, machinery, and mechanical equipment at work, at rest, or during maintenance operations. Coverage. MB is an All Risks “Accident” insurance on machinery.

Underwriting rates, terms and conditions

 it covers unforeseen and sudden physical loss or damage to the insured’s items, necessitating their repair or replacement. Loss or damage covered under Machinery insurance is mainly due to one of the following causes:

  • Faulty design (calculations, plans, drawings and specifications), faults at workshop or in erection, defects in casting and material
  • Faulty operation, lack of skill, negligence, malicious acts
  • Tearing apart on account of centrifugal force.
  • Physical explosion, fuel gas explosion in boilers
  • Short-circuit and other electrical causes
  • Shortage of water in boilers
  • Storm, frost, drifting ice.

The individual exclusions from the cover mainly comprise loss or damage caused by:

  • Fire, lightning, chemical explosions, burglary, and theft, like perils covered or coverable under other policies.
  • Inundation, flood, earthquake, subsidence, landslide, the impact of land borne, waterborne or airborne craft are also excluded.
  • Wear and tear due to ordinary use or operations and cavitation, erosion, corrosion, or boiler scale.
  • War or warlike operations, civil commotion of any kind as well as acts on the part of strikes and locked-out persons
  • Faults or defects for which the supplier is responsible either by law or under contract.
  • Nuclear reaction, nuclear radiation or radioactive contamination

The sum insured should always value the new item plus customs duties plus transportation and installation changes.

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