In the world of insurance, it is crucial to have comprehensive coverage that protects against all possible risks and damages. However, when it comes to large policies involving modifications, alterations, or new installations during the policy period, there is often a gap in coverage. This is where the minor works extension plays a vital role. In this article, we will delve deeper into what this extension covers and explore important considerations for underwriters while granting this cover.
What Does Minor Works Extension Cover?
The minor works extension provides coverage for accidental loss or damage to minor works carried out by the insured during the currency of their policy. This includes installation of new machinery, various types of works like modifications in existing plants to enhance production capacity or installation of new product lines. It acts as an additional layer of protection specifically designed for these activities.
However, it's essential to note that testing is not covered under this extension unless explicitly agreed upon separately. Another important aspect that needs attention is whether business interruption (BI) losses are included or excluded due to any loss or damage covered by this extension.
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Considerations While Granting Minor Works Extension:
1. Defining Project Limits:
Underwriters must define an upper limit for individual projects eligible for coverage under the minor works extension.
2. Aggregate Limit:
In addition to individual project limits, there should also be a clearly defined aggregate limit covering all such projects over the entire policy period. This prevents any ambiguity regarding how much can be claimed collectively for multiple small-scale projects undertaken during a given timeframe.
3. Separate Coverage for Larger Projects:
It's crucial not to allow minor works extensions with unlimited loss limits because doing so could enable insured parties to include even significant projects worth substantial amounts without procuring separate engineering policies. This situation is not acceptable, as larger projects should always be covered separately under appropriate engineering insurance policies like EAR (Erection All Risk) or CAR (Contractors' All Risks).
4. Exclusions and Testing:
Underwriters must clearly outline exclusions within the minor works extension wording, emphasizing that testing activities are not covered unless explicitly agreed upon separately.
Benefits of Minor Works Extension:
The inclusion of a comprehensive minor works extension brings several benefits to both insurers and insured parties:
1. Enhanced Coverage: By extending coverage to include minor works, insurers provide a more complete solution for policyholders involved in modifications or installations during the policy period.
2. Streamlined Process: Insured parties can avoid the hassle of procuring separate insurance policies for each small-scale project by utilizing the coverage provided through the minor works extension.
3. Cost Savings: Consolidating multiple smaller projects into a single policy with an aggregate limit reduces administrative costs associated with individual policies for each project.
In large insurance policies involving modifications, alterations, or new installations during the policy period, it's crucial to have adequate coverage against any potential loss or damage. The minor works extension plays a significant role in bridging this gap by providing coverage specifically designed for these activities carried out by insured parties.
By defining clear limits and exclusions within this extension, underwriters can ensure that only smaller-scale projects fall within its scope while larger projects are adequately covered under separate engineering insurance policies like EAR or CAR.
Understanding and implementing proper precautions when granting this extension ensures that both insurers and insured parties benefit from comprehensive protection against accidental loss or damage incurred during such operations.
Read about EAR insurance
Read about CAR insurance