The short answer
Book value, replacement cost and the basis of indemnity are different. Describe the machine and its equipment, document replacement and have the basis used in the policy confirmed. Examine repair, total loss and business interruption separately.
1. List the equipment actually in use
Start with each identifiable machine: manufacturer, model, number, year brought into service, site and owner. Add the options, accessories and adaptations necessary for it to operate. For leased equipment, check the responsibilities set out in the contract before assuming that a third party insures it.
Reconcile this inventory with the list in the policy. An acquisition, extension or relocation may have created a discrepancy. Designate who reports changes so that the list does not depend solely on the next financial year-end.
2. Document replacement, not just the balance sheet
Request a replacement quotation suited to current use. Separate the equipment price, options, transport, installation and commissioning, then have the items relevant to the sum insured specified. Net book value alone does not answer this question.
If the model is no longer available, describe the proposed replacement and differences in capacity. Retain the assumptions and the quotation date. The aim is to enable a documented discussion with the insurer, not to devise a depreciation formula valid for every machine.
3. Have the basis of indemnity confirmed
Ask how the policy treats a repair and a total loss, which values it uses and how it applies the excess and underinsurance. The declared sum and the benefit paid are not necessarily identical. Obtain the relevant clauses and a written explanation if the calculation remains ambiguous.
The AXA presentation and its product information sheet illustrate an engineering insurance offering, not a general standard or a recommendation of a provider. They serve as a reference for asking questions; only the terms of the applicable policy can answer them for your company.
4. Examine production downtime separately
List the products or services that depend on the equipment, alternative arrangements and constraints on returning it to service. An available part is not always enough: installation, testing and other dependencies can affect resumption. Involve the person who knows the production process.
Check whether business interruption is insured, for which events, items and period. It is not automatically included in machinery breakdown cover. Compare the limits with your continuity options, then record the choices: adjust the policy, strengthen backup arrangements or retain an identified share of the risk.
5. Before commissioning: three questions to ask
The answers depend on each policy. Ask these questions in writing before a new machine is commissioned.
- Is the machine covered from delivery, during assembly and testing, or only after commissioning?
- What value will the policy use for this machine: purchase price, replacement cost or another basis?
- Is business interruption caused by its breakdown provided for and, if so, with what contractual time limits?
Frequently asked questions
Is book value sufficient to insure a machine?
Not on its own. Compare it with the documented replacement cost and the basis required by the policy. Have the items included in the insured value confirmed.
Will the sum insured always be paid in full?
No. The loss, basis of indemnity, limits and excess apply according to the contract. Request a separate explanation for repair and total loss.
Is production downtime included?
Not automatically. Examine any business interruption cover, its triggering events, items and period separately from damage to the machine.