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Machinery Installation Insurance (During Setup): A UK Guide for Construction & Engineering Projects
Introduction: why “during setup” is the risky bit
Installing machinery is one of those phases where everything is in motion: expensive kit is being moved, lifted, aligned, wired, programmed, and tested—often while multiple contractors are working in the same area. A small mistake can mean a big loss: a dropped component, a damaged control panel, a fire during hot works, or a commissioning fault that takes a line out for weeks.
Machinery installation insurance (often referred to as Erection All Risks (EAR), Contractors’ All Risks (CAR) with an installation section, or Installation All Risks (IAR)) is designed to cover physical loss or damage to the machinery and associated works during the installation period—typically from arrival on site through to testing and handover.
This guide explains how the cover works in the UK, what to look for in a policy, and how construction and engineering firms can avoid the common gaps.
What is machinery installation insurance?
Machinery installation insurance is a specialist construction/engineering policy that covers sudden and unforeseen physical loss or damage to:
- Machinery and plant being installed (new or refurbished)
- Associated materials and components
- Installation works (including assembly, alignment, wiring, pipework, and integration)
- Sometimes temporary works and installation tools (depending on wording)
It is most relevant where the project involves mechanical and electrical (M&E) works, industrial plant, production lines, HVAC systems, lifts, escalators, renewable energy equipment, and complex control systems.
Common policy names you’ll hear
- EAR (Erection All Risks): often used for heavy engineering, industrial plant, and mechanical erection.
- CAR (Contractors’ All Risks): typically broader construction works, sometimes including an installation section.
- IAR (Installation All Risks): sometimes used for M&E contractors and equipment installation projects.
The label matters less than the scope, period of cover, testing/commissioning terms, and exclusions.
What does it typically cover?
Cover varies by insurer and wording, but a well-structured installation policy usually includes the following.
1) Transit and offloading (sometimes optional)
Some policies can include cover while the machinery is:
- In transit to site
- Being offloaded
- Temporarily stored before installation
This is a common gap. Many firms assume “it’s covered once it’s ours,” but transit may sit under a separate goods in transit policy, a supplier’s cover, or specific project insurance.
2) On-site storage
If machinery is stored on site before installation, the policy may cover damage from:
- Fire
- Flood
- Theft (subject to security conditions)
- Accidental impact
Check whether the insurer requires specific security measures (fencing, CCTV, locked containers, out-of-hours alarms, etc.).
3) Installation and erection works
This is the core of the cover: damage during assembly and installation, including:
- Lifting and positioning (cranes, forklifts, gantries)
- Mechanical assembly and alignment
- Electrical installation and control panels
- Pipework and ducting
- Integration into existing systems
Typical insured events include accidental damage, collapse during lifting, impact, and certain types of water damage.
4) Testing and commissioning
Testing is where losses can become expensive quickly. A good policy will clearly define:
- When testing cover begins
- What types of tests are included (cold testing, hot testing, load testing)
- Any additional excess or sub-limits during testing
Some policies restrict cover during testing or apply stricter exclusions for defects and faulty workmanship.
5) Third-party liability (often packaged)
Many project policies combine installation cover with public liability for:
- Injury to third parties
- Damage to third-party property
This is crucial if you’re working in a live environment (e.g., a factory still operating, a hospital wing, or a commercial building with tenants).
6) Existing property and surrounding works (if agreed)
If you’re installing machinery inside an existing building, you may need cover for:
- Damage to the existing structure
- Damage to existing plant and equipment
- Consequential damage to surrounding works
This is often handled via an “existing property” extension with strict conditions and sub-limits.
7) Delay in start-up / advanced loss of profits (optional)
Physical damage is one thing; the bigger cost can be the delay. Some projects buy Delay in Start-Up (DSU) or Advanced Loss of Profits (ALOP) to cover financial loss caused by insured damage delaying commissioning.
This is more common on large industrial and renewable energy projects.
What is usually excluded (and where claims get messy)
Installation policies are “all risks” in concept, but exclusions matter. Common ones include:
Defective design, materials, or workmanship
Most policies exclude the cost of rectifying the defective part itself, but may cover resultant damage. The exact split varies.
Example: If a poorly torqued bolt fails and damages a gearbox, the bolt may be excluded but the gearbox damage may be covered—depending on wording.
Wear and tear / gradual deterioration
Not intended for maintenance issues or gradual damage.
Mechanical or electrical breakdown (post-handover)
Once the machinery is handed over, breakdown is usually covered under machinery breakdown (engineering insurance), not installation cover.
Cyber events and software issues
If commissioning involves software, PLC programming, remote access, or network integration, check cyber exclusions. You may need separate cyber cover.
Theft without forcible and violent entry
Theft cover often depends on security conditions and evidence of forced entry.
Hot works and fire precautions
Fire claims can be declined if hot works permits, fire watches, or housekeeping standards weren’t followed.
Pollution and contamination
Often excluded or heavily restricted unless specifically endorsed.
Who needs machinery installation insurance?
This cover is relevant for multiple parties, and the “right” policy structure depends on contract terms.
M&E contractors and installation firms
If you’re responsible for the works until handover, you’re exposed to damage during installation and testing.
Principal contractors
If you’re managing the site and subcontracting installation, you may still carry responsibility under the main contract.
Equipment suppliers (where they install)
If the supplier’s scope includes installation/commissioning, they may need project cover or to be named on the principal policy.
Manufacturers installing production lines
If you’re installing in your own facility, you still face the same risks—especially where the installation is complex and downtime costs are high.
Typical projects that benefit from this cover
- Factory production lines and automation cells
- HVAC plant rooms and building services upgrades
- Lifts and escalators
- Renewable energy installations (e.g., biomass plant equipment, battery storage systems)
- Water treatment and pumping stations
- Food processing machinery
- Printing presses and packaging lines
- Medical and laboratory equipment installations
Key policy details to get right
This is where a lot of policies look “fine” until a claim happens.
1) Period of insurance and handover definition
Confirm:
- When cover starts (delivery? offloading? storage?)
- When it ends (practical completion? takeover? after testing?)
- Any maintenance/defects liability period cover
If the contract includes a defects period, you may need a maintenance extension.
2) Sum insured and basis of valuation
Make sure the sum insured reflects:
- Replacement cost of machinery (including freight)
- Customs duties (if applicable)
- Installation labour and specialist contractors
- Commissioning costs
- Any escalation for price increases
Underinsurance can reduce claims payments.
3) Testing and commissioning terms
Ask:
- Is hot testing included?
- Are there sub-limits during testing?
- Is there a higher excess during testing?
4) Excesses (deductibles)
Installation policies often have:
- A standard excess for accidental damage
- A higher excess for theft
- A separate excess for flood/storm
Choose excesses that match your cashflow and risk appetite.
5) Contract conditions and “who insures what”
Your contract may specify:
- Which party arranges project insurance
- Joint names requirements
- Waiver of subrogation
- Indemnity limits
If the contract says the principal contractor arranges cover, ensure subcontractors are included and the scope matches their work.
6) Security and risk management conditions
Insurers may require:
- Site security standards
- Hot works permits
- Fire extinguishers and fire watch
- Method statements for lifting operations
- Competent contractor requirements
If these conditions aren’t met, claims can be disputed.
How claims typically happen (real-world scenarios)
Here are common loss scenarios during setup:
- Dropped load during lifting: a crane lift goes wrong and a component is damaged.
- Water ingress: a plant room floods during installation, damaging control panels.
- Fire during hot works: sparks ignite packaging or insulation.
- Impact damage: a forklift clips a newly installed unit.
- Commissioning fault: an incorrect setting causes overheating and damage during testing.
- Theft of copper or components: theft overnight from unsecured areas.
The best outcomes happen when the project has clear documentation: delivery notes, photos, method statements, permits, and commissioning records.
Risk management tips that insurers like (and that reduce downtime)
You don’t need to be perfect—just consistent.
- Use formal lifting plans and competent appointed persons.
- Keep machinery in secure, weather-protected storage before installation.
- Implement a strict hot works permit process with fire watch and housekeeping.
- Photograph machinery on arrival and at key milestones.
- Separate high-value components and control panels from general site storage.
- Document commissioning steps and keep change logs for PLC/software updates.
- Control access: sign-in procedures, tool control, and clear supervision.
How this differs from other insurance types
A quick way to avoid buying the wrong cover.
Contractors’ All Risks (CAR)
CAR often focuses on building works. It can include installation, but you must confirm the installation section is suitable for high-value machinery and testing.
Machinery breakdown (engineering insurance)
This is usually for operational machinery after handover. It covers sudden breakdown, often including electrical/mechanical failure, but it’s not designed for the installation phase.
Public liability and employers’ liability
These cover injury and third-party property damage (and employee injury), not damage to the machinery you’re installing.
Professional indemnity
If you design or specify the system, PI covers claims arising from professional negligence—not physical damage during installation.
What information you’ll be asked for when arranging cover
To quote accurately, insurers typically want:
- Project description and location
- Contract value and breakdown (machinery value vs installation labour)
- Installation method and lifting details
- Testing/commissioning plan and duration
- Security arrangements and site controls
- Any work in a live environment (tenants, public access, ongoing operations)
- Claims history and experience with similar installations
The clearer you are upfront, the fewer surprises later.
FAQs: Machinery installation insurance (during setup)
Is machinery installation insurance the same as EAR?
Often, yes in practice. EAR is a common label for erection and installation risks, especially on engineering-heavy projects. The key is the wording and extensions, not the name.
Does it cover damage caused by faulty workmanship?
Usually it covers resultant damage but excludes the cost of rectifying the defective work itself. The exact position depends on the policy clause.
Are we covered during testing and commissioning?
Sometimes automatically, sometimes with restrictions. Always check the testing clause, sub-limits, and excesses.
Do we need cover if the principal contractor already has CAR?
Maybe. You need to confirm the CAR policy includes installation and testing for your scope, and that you’re included as an insured party (often on a joint names basis).
What about theft from site?
Theft is commonly covered but subject to security conditions and evidence requirements. If you’re storing high-value components, make sure the security measures match the policy.
Can it cover existing plant and equipment in the building?
It can, but usually only by endorsement with sub-limits and strict conditions. This is important for retrofit projects.
Next step: get the cover matched to your contract
Machinery installation insurance is one of those policies where the detail matters. If you’re installing high-value equipment, working in a live environment, or commissioning is complex, it’s worth structuring the cover around your contract responsibilities and the testing period.
If you want, share the project type (e.g., HVAC plant room, production line, lift install), the approximate machinery value, and whether hot testing is required—and I’ll outline the most sensible cover structure and the key clauses to request.