Erection All Risk Insurance (EAR Insurance)

Erection All Risk Insurance Meaning: What Is It?

Erection All Risk Insurance, also called EAR insurance, is a specialised engineering insurance policy that financially protects projects during the installation, erection, testing, and commissioning of machinery, plants, and equipment.

The policy covers sudden physical loss or damage that may happen while machinery or industrial equipment is being installed at the project site.

In plain words, if something goes wrong during the erection process, such as fire, collapse, theft, faulty installation, or accidental damage, the insurer covers the financial loss as per the policy terms.

EAR insurance coverage usually starts when the equipment arrives at the site and continues until testing and commissioning are successfully completed.

The Major Industry Misconception

⚠️ The Myth: Many project owners and subcontractors assume that heavy plant machinery can only be insured after it has successfully passed final inspection and commissioned testing.

The Reality: The assembly and testing phase is actually when your machinery is at its most vulnerable. An Erection All Risks insurance policy covers your equipment from the exact moment the components are unloaded at the project site — right through the volatile testing and commissioning windows, up until the final handover to the client.

Who Needs EAR Insurance in UAE?

EAR insurance is commonly purchased by businesses and contractors involved in engineering and installation projects. The following parties can buy an Erection All Risk policy:

• General contractors
• Subcontractors
• EPC contractors
• Machinery suppliers
• Equipment manufacturers
• Factory owners
• Project owners
• Infrastructure companies
• Industrial plant operators

The policy can be purchased jointly by the contractor and project owner or individually based on project requirements.

EAR Insurance Coverage: What is Included?

An Erection All Risk policy typically functions on an “all risks” basis. This means that unless a specific peril is explicitly excluded in the policy document, any sudden, accidental, and unforeseen physical loss or damage to the insured property will be financially indemnified.

The core EAR insurance coverage is designed to absorb shocks from several distinct categories of peril:

1. Acts of God (AOG Perils)

In the insurance sector, AOG perils refer to natural events completely beyond human control. In the UAE, this includes:

• Severe sandstorms and windstorms
• Flash floods and sudden site inundation
• Earthquakes and lightning strikes

2. Human Error and Malicious Acts

• General negligence, lack of operational experience, or errors made during physical assembly
• Theft, site burglary, and vandalism of expensive components
• Riots, strikes, and malicious property damage

3. Electrical and Mechanical Hazards

• Short-circuits, arcing, and excess voltage surges
• Internal tearing apart of components due to excess pressure, vacuum malfunctions, or centrifugal forces during trial runs

What is Not Covered Under EAR Insurance?

Like every insurance policy, Erection All Risks insurance also has exclusions. Common exclusions include:

• Intentional damage
• War and political unrest
• Normal wear and tear
• Gradual deterioration
• Faulty design defects
• Pre-existing damage
• Mechanical defects known before installation
• Nuclear risks

Additional coverage may be available for some risks through policy extensions.

Crucial Extensions and Policy Add-Ons of EAR Insurance

While base EAR insurance handles immediate property damage, complex engineering ventures in Dubai or Abu Dhabi typically require policy extensions to cover collateral exposures. These extensions include:

Third-Party Liability (TPL)

If a heavy industrial turbine collapses during installation and crashes through an adjacent property’s wall or injures a subcontractor's team member, the financial fallout can be devastating. TPL extension covers legal liabilities stemming from third-party bodily injuries or property damage caused directly by the erection works.

Testing and Commissioning Cover

The most nerve-wracking stage of any mechanical setup is turning the power on for the first time. EAR insurance specifically covers electrical or mechanical breakdowns that occur during this critical operational testing phase before final handover.

Extended Maintenance Periods

Once the construction wraps up, the contractor’s job isn't entirely done. This extension keeps the coverage active for a specified timeframe (typically 3 to 12 months) while workers return to the site to remedy minor defects, complete outstanding contract provisions, or conduct routine maintenance visits.

Key Benefits of Erection All Risk Insurance

• Financial Protection Against Project Losses: Installation projects involve expensive machinery and equipment. EAR insurance reduces the financial losses caused by accidents or damage during the erection phase.
• Reduces Project Delays: Unexpected incidents can delay project completion and increase costs. EAR insurance helps businesses recover quickly by covering repair or replacement costs.
• Covers Third-Party Liabilities: If your project damages nearby property or causes injuries, the policy can protect against legal and compensation expenses.
• Protection During Testing Phase: Machinery is highly vulnerable during testing and commissioning. EAR insurance continues coverage during this critical period.
• Better Business Confidence: Contractors and project owners can focus on project execution without constantly worrying about unexpected financial setbacks.

Common Projects Covered Under EAR Insurance

Erection All Risks insurance is suitable for many industrial and engineering projects, including:

• Power plants
• Manufacturing units
• Cement plants
• Oil & gas facilities
• Industrial machinery installation
• HVAC installation
• Steel structure erection
• Electrical installations
• Factory setup projects
• Renewable energy projects
• Processing plants

Difference Between EAR Insurance and CAR Insurance

Many people confuse EAR insurance with Contractors All Risk (CAR) insurance. Here are the basic differences:

In simple terms:

• CAR insurance focuses on construction work
• EAR insurance focuses on machinery installation and erection work

Optional Extensions Available Under EAR Insurance in UAE

Businesses in the UAE can customise EAR insurance coverage with add-ons such as:

• Maintenance period cover
• Extended maintenance cover
• Debris removal expenses
• Air freight charges
• Express freight expenses
• Additional customs duty
• Earthquake cover
• Terrorism cover
• Surrounding property damage
• Escalation clause
• Construction machinery cover

Example of EAR Insurance Claim

Example 1: Machinery Collapse During Installation

A contractor installs heavy industrial machinery at a manufacturing plant. During erection, the machine collapses and damages nearby property.

EAR insurance may cover:

• Repair costs for damaged machinery
• Third-party property damage
• Worker injury liabilities (if included)

Example 2: Fire During Electrical Installation

An electrical fault causes a fire during equipment installation inside a commercial building.

EAR insurance can help cover:

• Fire damage repairs
• Replacement of damaged electrical systems
• Restoration costs

Claim Process for Erection All Risks Insurance

If an incident occurs, follow these steps to file your claim without any delay or hassle:

Step 1: Inform the Insurer Immediately

Notify the insurer or broker as soon as possible after the loss.

Step 2: Submit Required Documents

Typical documents include:

• Policy copy
• Project details
• Claim form
• Incident report
• Photographs
• Repair estimates

Step 3: Surveyor Inspection

The insurance company appoints a surveyor to inspect the damage.

Step 4: Claim Assessment

The insurer evaluates the loss based on policy terms.

Step 5: Settlement

Once approved, compensation is paid as per policy conditions.

Why is EAR Insurance Important in the UAE?

The UAE has large-scale infrastructure, industrial, and engineering projects running across sectors like:

• Construction
• Energy
• Oil & gas
• Manufacturing
• Logistics
• Renewable energy

Since these projects involve expensive machinery and tight timelines, Erection All Risks insurance becomes essential for reducing financial uncertainty and protecting project investments.

Tips Before Buying an Erection All Risk Policy

Before purchasing EAR insurance in UAE, businesses should:

• Assess total project value carefully
• Include testing and commissioning periods
• Check third-party liability coverage
• Review exclusions properly
• Compare policy extensions
• Work with experienced insurance advisors
• Ensure adequate sum insured

Final Thoughts

Erection All Risk Insurance is one of the most important engineering insurance solutions for contractors, project owners, manufacturers, and industrial businesses in the UAE.

From machinery installation to testing and commissioning, EAR insurance coverage shields projects from the impact of costly accidents, physical damage, and third-party liabilities.

Whether you are setting up a factory, installing heavy equipment, or managing a large engineering project, the right erection all risk policy can help protect your investment, reduce project delays, and improve business confidence.

FAQs for Erection All Risk Policy

Directly from experts

We’re committed to protecting your business at every stage with tailored insurance solutions. In the UAE’s dynamic market, our affordable plans help you stay compliant and financially secure. Whether you’re starting out or scaling up, our business insurance experts guide you through regulations and recommend comprehensive coverage, so your business stays protected against several financial risks.

Ashu Bajaj

Business Head - Business Insurance

Other SME Insurance in UAE