A very useful publication which may prove to be valuable for the owners of DG sets

The following paragraphs have been reproduced from:

Diesel Generator SET INSURANCE_Optima.pdf

Diesel Generator (D.G) Set Insurance

“Diesel Generator sets are used in case of power cuts or grid failures and in places that have no electric connection. DG Sets have also emerged as the best alternative for standby and emergency power generation. Therefore, almost all industries have and use D.G. Sets.

Insuring a D.G. Set The D.G. Set can be covered in the Machinery Breakdown Insurance:

• Either as one machine comprising Diesel Engine, A.C. Generator, Control Panel, Cable and the Acoustic Enclosure

• Or the following assemblies can be insured separately:

• Diesel Engine (Prime Mover)

• A.C. Generator (Alternator)

• Control Panel incl. Cable

• Acoustic Enclosures

No further break-up of the components is allowed.

As there is no scope of breakdown in an Acoustic Enclosure Canopy, it may not be insured. However as it can suffer damage from the spread of a fire generated inside the engine or alternator or explosion inside, it should be covered under Standard Fire & Special Peril Policy.

How to Select the Sum Insured The Sum Insured should be equal to the new replacement value, i.e. cost of replacement of the insured property by new property of the same kind and same capacity. The replacement cost declared should be inclusive of taxes & duties, freight/delivery cost at site, erection cost etc.

How to Insure D.G. Set

The first option is to insure the complete D.G. Set as one machine.

The second option is to take the Sum Insured of Diesel Engine, AC Generator (Alternator), Control Panel incl. Cable, Acoustic Enclosure separately.

Although the first option is simpler, it has a drawback.

As the deductible is a percentage of the Sum Insured of the machine, by choosing this option small value claims particularly of Alternator Stator &/or Rotor rewinding, Exciter Stator & Rotor, AVR, Bearings and Parts of Control Panel will be washed away or drastically reduced. e.g. in the event of damage to the engine, the claim of engine components will stand reduced because the deductible will be based on the total value of the machine including the Alternator & Control Panel.

Precautions To Be Taken During Taking the Policy To Avoid Problems at the Time of Claim

• If you want to take coverage of frame, foundation & masonry from unforeseen and sudden physical loss or damage, it must be covered specifically and it’s Sum Insured should be declared separately.

• Log Book of D.G. Set is to be maintained to prove that the loss has not been caused by wear & tear. • Major overhaul & breakdown repairs to be recorded in the Log Book to get the benefit of reduced depreciation thereafter.

• The cost of complete DG Set is always less than the collective individual cost of Diesel Engine, Alternator, Control Panel & cable and Acoustic Enclosure.

If you are opting for the separate sum insured of Diesel Engine, Alternator, Control Panel & Cable and Acoustic Enclosure then you must take the individual value of the item and not as a composite value of DG Set. This is an essential exercise to avoid average clause/ under insurance clause at the time of claim.

• Discounts and special price agreements upon purchase of the items to be insured should not be taken into consideration when determining the Sum Insured because after the loss such discounts may not be available.

• Under-insurance should be avoided; otherwise claims for repairs or replacements will be paid only in the proportion which the Sum Insured bears to the current new replacement value. Precautions To Be Taken During Taking the Policy To Avoid Problems at the Time of Claim

• If you want to take coverage of frame, foundation & masonry from unforeseen and sudden physical loss or damage, it must be covered specifically and it’s Sum Insured should be declared separately. • 

Log Book of D.G. Set is to be maintained to prove that the loss has not been caused by wear & tear. • Major overhaul & breakdown repairs to be recorded in the Log Book to get the benefit of reduced depreciation thereafter.”