Building a business is one of the best way to achieve a positive impact on the world economy. While aiming to be successful and profitable, there are factors that expose the business to getting lower profits or even fail. As such, the factors that threaten a company’s ability to meet its target or achieve its financial goals is known as ‘business risks’.  All these can come from various sources either internally or externally.

To protect business continuity against all these risks, every business owner or operator should consider taking up business insurance / Takaful to ensure there is a ‘safety net’ in case of any disruption in the business.

The Equipment All Risks policy/certificate covers loss of or damage to the mobile equipment, its accessories and spare parts whilst attached thereon as a result of accidental collision or overturning, fire, external explosion, self-ignition or lightning and theft.

Scope Of Cover

1. Scope of Cover

The policy/certificate covers loss of or damage caused by or arising from the  loss of or damage to the property specified in the policy/certificate schedule  and standard accessories and spare parts whilst thereon by :

  • Accidental collision or overturning consequent upon mechanical breakdown or wear and tear
  • Fire, external explosion, self-ignition or lightning
  • Burglary, housebreaking or theft

The insurance company or Takaful operator may pay in cash the amount of the loss or damage or may repair, reinstate or replace the property or any part thereof or its accessories or spare parts (not exceeding the value of the parts lost or damaged and the reasonable cost of fitting or repairing such parts).

The insurer/Takaful operator can also cover reasonable cost of protection and removal or delivery to the nearest repairers up to RM500.00.

Subject Matter

2. Subject Matter

Subject matter that can be covered under this policy/certificate are as follows:-

Tractors

Forklifts

Cranes

Pick-up vehicles used on private roads

Excavators

Logging trucks

Basis Of Sum Insured / Covered

3. Basis of Sum Insured/ Covered

Market Value 

The sum insured/covered should represent the value after taking into consideration the depreciation factor.

The Insurer/Takaful Operator  must compensate the insured/participant the market price of the insured/covered assets rather than the actual cash value or the replacement value of the insured/covered property.

Reinstatement Value 

The sum insured/covered should represent the cost needed to replace the item (with similar quality) in the event of loss or damage. (equipment must not exceed 5 years of age)

Main Exclusions

4. Main Exclusions

An exclusion is a policy/Certificate provision that eliminates coverage for some type of risk. Exclusions narrow the scope of coverage provided by the  insuring/covering agreement. In many insurance policies/Takaful certificates, the insuring/covering agreement is very broad. Insurers/Takaful operators utilize exclusions to carve away coverage for risks they are unwilling to insure/cover.

  1. Outside the territorial limit as stated in the policy/certificate schedule.
  2. Whilst the property is being used on the road as defined in the Road Traffic Ordinance for the time being in force in the territory as  stated in the territorial limit.
  3. Whilst in transit (including the process of loading and unloading).
  4. Whilst the property is operated by any person other than an authorised or licences operator.
  5. Whilst the equipment is used otherwise than for the purpose for which it is designed or adapted.
  6. Whilst the property is operated by an authorised or license operator who is under the influence of intoxicating liquor or drugs.
  1. Any latent or mechanical defect, mechanical derangement, mechanical or electrical failures, breakages, depreciation, atmospheric conditions or any other gradually operating cause.
  2. Mechanical or electrical breakdown or wear and tear.
  3. Abnormal testing or intentional overloading of equipment or any experiment involving the imposition of abnormal conditions.
  4. Loss or damage caused by overloading or strain

Loss of accessories and spare parts unless the property is stolen at the same time.

  1. Tyres or wheels or tracks unless the property is also damaged at the same time.
  2. The canopies unless caused by or resulting from the overturning of the property.

Loss or damage caused by or arising out of or contributed to by or traceable to earthquake, volcanic eruption, subterranean fire, flood, typhoon, hurricane, landslip, subsidence or sinking of soil/earth, or other convulsions of nature.

Common Clauses

5. Common Clauses (To be agreed by Underwriter)

  1. Market value or fair market value is the price insured/covered equipment in its current state would be able to command in a competitive market.
  2. Determines the amount of necessary coverage for the appropriate insurance/Takaful and the valuation factors into the premium/contribution cost.
  3. However, in the event of a loss, what the insurer/Takaful operator pays may differ from the market value stipulated in the policy/certificate. This is because it can depreciate over time.
  4. Thus, market value is not a fixed figure. It depends upon the current market and industry guidelines.
  1. Reinstatement Value is the terms and conditions of payment of reinstatement claims under the amount of insurance policies/Takaful certificate. It defines the reinstatement value that will be payable after the loss, and the conditions under which this value may be altered even after the claim has been accepted by the insurer/Takaful operator.
  2. The principle of indemnity inspires this definition, according to which, the ‘cost’ of reinstatement of the property will be the ‘cost’ which would have been incurred if the property is reinstated at the same place where it existed before the loss. This ‘cost’ will exclude:
  • Any cost of modification
  • Cost of transfer to other location
  • The positive cost differential of reinstating the equipment at another place

Strikes, Riots and Civil Commotion Clause (SRCC) referring to loss or damage directly caused by strikers, locked-out workmen, persons’ participation in labour disturbances, and riots of various kinds.

The Payment Account established by an insurer/Takaful operator under a finite insurance/Takaful program. Payment accounts used to hold funds specifically earmarked to pay losses.

6. Specific Conditions

The insurance company or Takaful operator may at its discretion reinstate, repair or replace the property insured/covered or any part thereof instead of paying the amount of the loss or damage.

7. Underwriting Aspects

Location of Equipment

  • Location of business operation and the equipment. 

  • Location with high or low risk (such as accessible road).

Usage of Equipment

Subject to the types of equipment depending on the size of the work and the usage of the project. 

Construction class

Standards and codes have been developed to ensure that all constructed objects such as buildings must be  conform to a minimum level of safety.

A Requirement of Road tax

The requirements under the Road Transport Act 1987  for equipments which can also used or need to be moving on the road such as tractor and excavator.

Age of Equipment

Effective age is subjective. Depending on how the machinery was cared for, the effective age can be lesser than or greater than the actual age. 

Policy/Certificate Extensions

  • Coverage that is already provided by the policy/certificate but that is extended in some way.
  • Named peril policy/certificate can be endorsed with additional insured/covered perils to broaden the coverage provided.

Loss experience

Underwriting factors and premium/contribution charges  will be based on  loss experience.