Contractors Plant & Machinery (CPM)
Contractors Plant and Machinery (CPM) insurance: cover for the contractor's own construction equipment, how it differs from CAR, what breakdown cover adds, how the sum insured is set, and conditions that can defeat a claim.
What CPM is
A contractor's cranes, excavators, backhoe loaders, concrete mixers and compressors move from job to job and outlast any single project. Contractors Plant and Machinery (CPM) insurance covers physical loss of or damage to this equipment.
The contrast with Contractors All Risk is the heart of the topic. CAR is a project-specific policy covering the construction works. CPM covers the contractor's own machines, usually under an annual policy that lists each machine. A CAR policy does not cover the contractor's plant unless it is specifically extended to do so.
Where and what it covers
Cover applies at the locations the policy specifies. Transit between sites may be added by extension. Vehicles registered for road use are insured under motor policies, not under CPM.
Standard CPM covers accidental external damage, such as a machine overturning or being struck. It does not by itself cover internal mechanical or electrical failures like an engine seizure or a hydraulic pump failure. For those, Breakdown Cover has to be specifically added.
Sum insured and fleets
The sum insured for each machine reflects its current replacement value, meaning the cost of replacing it today. The figure in the contractor's books after depreciation is lower, and using it leads to under-insurance and reduced claim payouts.
A fleet is commonly insured under a single CPM policy with a schedule listing every machine and its sum insured. This is simpler to administer than a separate policy for each machine, and it keeps one record of what is insured and for how much.
Conditions on operation
A CPM policy carries conditions about how the equipment is operated. Operating a machine without a valid licence or the required certification breaches those conditions, and a claim arising in that situation can be rejected. Whether a particular breach defeats a particular claim depends on the policy wording and the facts.
Rules at a glance
Two losses on the same excavator
Illustration: a contractor running an earthmoving business insures an excavator under CPM without the breakdown extension. In June a retaining wall gives way and the machine is crushed on one side. This is accidental external damage and falls within standard CPM, subject to the policy terms. In September the same machine's hydraulic pump fails from within. That is an internal mechanical failure, and without Breakdown Cover it is outside the policy.
Book value against replacement value
- Assumptions, for arithmetic only: a crane costs ₹1,00,00,000 to replace today; its depreciated book value is ₹60,00,000 and the owner insures it for that amount; the policy applies average for under-insurance; accidental damage is assessed at ₹20,00,000.
- Proportion insured = ₹60,00,000 ÷ ₹1,00,00,000 = 0.6.
- Claim = 0.6 × ₹20,00,000 = ₹12,00,000, before any other term of the policy.
- Amount borne by the owner = ₹20,00,000 − ₹12,00,000 = ₹8,00,000.
Result. Insuring at book value turns a ₹20,00,000 loss into a ₹12,00,000 payment in this example; the owner bears ₹8,00,000.
Key points
- CPM covers the contractor's own plant and machinery, not the construction works.
- It is usually an annual policy with a schedule of machines, while CAR is tied to one project.
- Cover applies at the locations specified; transit between sites is an extension, and road-registered vehicles go under motor policies.
- Standard CPM covers accidental external damage; internal mechanical or electrical failure needs Breakdown Cover.
- The sum insured is the current replacement value, not depreciated book value.
- A claim may be rejected if the operator did not hold a valid licence or required certification.
Common misunderstandings
- CAR does not cover the contractor's machines by default: it covers the works, and plant needs a specific extension or a CPM policy.
- CPM is not breakdown insurance: internal mechanical or electrical failure needs the Breakdown Cover extension.
- Book value is not the sum insured: the basis is current replacement value.
- A road-registered vehicle is not a CPM risk: it is insured under a motor policy.
Questions people ask
Is CPM taken project by project?
Usually not. It is usually an annual policy listing each machine, and it applies at the locations the policy specifies.
Is a machine covered while being moved to another site?
Only if transit between sites has been added by extension. Otherwise cover applies at the specified locations.
How is a fleet of 20 machines commonly insured?
Under a single CPM policy with a schedule listing every machine and its sum insured, which is simpler to administer than separate policies.
What this lesson relies on
- Contractors Plant and Machinery policy wording — schedule of machines, locations, operating conditions, breakdown and transit extensions
- Contractors All Risk policy wording — treatment of contractor's plant
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.