The list of extensions worth asking for in a plant and machinery policy is the same for everyone. The answers are not. The dividing line runs between two kinds of business: those that operate their own machines, and those that hire them out to others. A company with its own operators, documented servicing and predictable sites can obtain things a plant hire company will not get as easily – and internal breakdown cover is the clearest example. So the practical question is not "does the market give this", but "does the market give this to a business like mine".
This article comes out of real work: placing fleets in the market and insuring individual units. What recurs in both cases is not the fact of a restriction, but the reason behind it. Insurers rarely write down why they say no. Once you understand it, the conversation can be run differently.
First – what CPM actually insures
CPM (Contractors' Plant and Machinery) is the engineering insurance class for a company's own plant. You will also see CPE (Contractors' Plant and Equipment) and Plant All Risks – the same product, not different covers. In Latvia insurers usually handle construction, agricultural and forestry machines under this one product, even though internationally forestry equipment often sits outside standard appetite.
Two points about how the cover works, and they change everything that follows:
- The base cover is "all risks", not a list of named events. The typical wording responds to sudden and unforeseen damage from any cause that is not expressly excluded, and it applies both while the machine is working and while it stands idle. Theft is therefore not a "named peril" – it is one of many causes, limited not by a list but by the policy's conditions on storage, keys and immobilisers.
- Latvian insurers sell several tiers. One and the same insurer may offer named perils, all risks, and an extended all risks variant. When comparing quotes, the first thing to confirm is that you are comparing the same tier – otherwise the price difference means nothing.
Do not confuse CPM with CAR/EAR. CAR/EAR insures the works under construction – the permanent works, materials and equipment to be installed. CPM insures your machines. Plant cover can also be added to a CAR policy, but it then usually applies on that site only: not in transit to it, not in the workshop, not between sites. For a mobile fleet a separate annual policy is a different product, not a more expensive version of the same thing.
Two profiles, one list
Before sending a submission it is worth being honest about which side of the line the business sits on, because everything else follows from it.
| Owner-operator | Plant hire company | |
|---|---|---|
| Typical business | Contractor, road builder, forestry company, farmer, municipal services | A business whose core activity is hiring plant out |
| Who operates the machine | Own operators, known and trained in-house | The hirer's staff, whom the owner never meets |
| Who services it | The company or its own workshop, to a schedule | The owner between hires, but not during use |
| Where it works | Known sites, a known type of work | Somewhere different every week, with variable loading |
| How often the user changes | Rarely | Constantly |
Why the insurer's answer differs
An underwriter is not rating the machine but the control over it. The value is identical in both cases; what differs is how much can be said about its daily life in advance, and how much of that can be evidenced.
- The operator. Your own operator can be trained, checked and dismissed. The hirer's operator can be none of those things.
- Maintenance. An owner-operator can produce a service history and confirm the manufacturer's intervals were kept. A hire company can vouch for servicing between hires, but not for how the machine was used while it was away.
- Type of work. For a contractor this is stable and describable. In a hire fleet the same machine digs a trench one week and works in demolition the next.
- Wear versus damage. In a hire business it is harder for the insurer to separate the consequences of wear from insurable damage – and that boundary is exactly what they do not want to fund.
The important conclusion follows from this: a restriction placed on a hire company is usually not a product limitation but a matter of segment and evidence. The same text submitted by a contractor with a documented service history can get a different answer. And conversely – a hire company should not spend its negotiating capital on what this segment is not given; that energy belongs elsewhere.
Eight extensions and what to expect in each profile
| Extension | Owner-operator | Plant hire company |
|---|---|---|
| Internal mechanical and electrical breakdown | Available as an optional risk or extension, subject to age, engine-hour and servicing conditions | Available less often and on stricter terms |
| No depreciation on replacement parts | Already standard in many wordings – check the scale | Same, but the scale is often stricter for hire plant |
| Foreign object ingress | Relevant to agricultural and forestry machines | Requires justification unit by unit |
| Substitute plant hire | Includable and cheap | Includable and cheap |
| Continuing hire charges | Not applicable | A separate cover that is often forgotten |
| Recovery and extraction costs | Includable, check the limit | Includable, check the limit |
| Attachments and additional equipment | Each one must be scheduled – excluded by default | Each one must be scheduled – excluded by default |
| Cover while on hire | Only needed for occasional hiring out | A base requirement for the whole programme |
The table reflects the typical course of a negotiation in the Latvian market in 2026. The actual answer always depends on the insurer, the type and age of the machine and the work profile.
If the plant is yours and you operate it yourself
1. Breakdown cover is the one worth fighting for
In the base CPM cover, internal mechanical or electrical damage without an external cause is excluded. Two points make that exclusion much narrower than it sounds:
- Only the failed component itself is excluded. If the breakdown then causes an accident or damages other parts, that consequential damage is usually indemnifiable. So "breakdown is not covered" is too broad an answer.
- Breakdown can be bought. Some insurers offer it as an optional risk within the same policy; in the German market a combined machinery-and-own-damage product is the standard. Before assuming you need a separate policy, it is worth asking directly.
The underwriter's concern is specific and reasonable: they have no interest in funding your maintenance budget. So I narrow the request myself, before the insurer does it for me:
- an age limit and an engine-hour ceiling, rather than the whole fleet;
- a separate, higher deductible for this risk alone;
- a sub-limit per event and in the aggregate;
- wear, corrosion, inadequate maintenance, consumables and manufacturer's warranty cases excluded in the submission itself;
- an offer to produce the service history and confirm adherence to the manufacturer's service intervals.
A submission written this way is no longer a request to cover wear, and that changes the conversation. Even where full cover is not granted, it is often granted for the newer part of the fleet – which is where the expensive machines are.
2. Depreciation on parts: ask, do not assume
This is the point where the buyer, not the insurer, most often gets it wrong. In the international engineering model wordings and in some Latvian wordings, no depreciation at all is applied to replacement parts on a partial loss; depreciation only enters the calculation on a total loss. Other insurers apply a published scale tied to the machine's age and engine hours – a few per cent for newer plant and considerably more for older units.
The practical action is therefore singular: ask to see the scale. Once it is on paper, it is immediately clear which units in the fleet it favours and which it does not, and whether it is worth negotiating at all. Ask separately about new-for-old cover on a total loss – that usually applies only to genuinely new plant and is a different question.
3. Foreign objects in the mechanism
I ask for this where the risk can be justified: chippers, combines and harvesters, forestry machines, demolition work. In Latvia several insurers treat it as a deductible question for agricultural machines – for instance, not applying an increased deductible where a foreign object enters the cutting or feed mechanism. For construction plant a generic request makes little sense here: a stone striking an excavator from the outside is already an external cause and falls within all risks cover.
If you hire plant out
4. Cover while on hire must be agreed, not assumed
In several Latvian insurers' wordings, hiring the machine out is excluded unless separately agreed. Nor is it enough to ask whether the policy "works during hire" – the answer will be "yes", and it will mean nothing. The wording I ask to have confirmed covers four things at once:
- cover applies to both short-term and long-term hire;
- cover applies both with the owner's operator and without one;
- cover applies while the machine remains on the hirer's site outside working hours;
- each individual hirer does not have to be approved by the insurer separately.
In return the insurer will normally impose its own conditions, and it is better to know them in advance: a valid written hire contract for every hire period, verification of the hirer's identity, and sometimes a requirement that the hire terms are no weaker than the policy conditions. The last item on the list above – approval for each hirer – is the one most often missed in practice. If the policy contains such a requirement, a hire company will not physically meet it in any busy week, and an unmet requirement is exactly what a declinature relies on.
5. What happens if the hirer breaches the conditions
The policy carries requirements: where the machine is kept, security, key storage, GPS, operation in accordance with the manual. While the machine is with you, these are achievable. While it is with the hirer, the hirer performs them – and you find out only once something has already happened.
The wording worth asking for here: a breach of policy conditions by the hirer shall not affect indemnity to the insured, provided the insured was unaware of the breach and could not have prevented it; the insurer retains its rights of recourse against the hirer.
Being honest about how easily this is obtained. This is not a standard market clause, and market practice runs rather the other way: cover is tied to the quality of the hire contract and to hirer verification. So I offer it as a negotiating point, not as an expected outcome, and I build the argument from the insurer's own logic: the loss does not disappear, it moves to the party that caused the breach. If the clause cannot be achieved, the risk is managed through the hire contract, a deposit and hirer checks – and with the knowledge that this gap exists.
The other side of the same question is the hire contract. If the policy gives the insurer recourse against the hirer, then the hire contract needs a clear allocation of liability, identity verification and, depending on the value of the machine, a deposit. Otherwise recourse is a right to pursue someone with nothing to pursue – and at the next renewal the insurer will remember it.
The UK industry's model hire conditions (CPA Model Conditions) are often used as a reference for allocating liability: the hirer is responsible for the plant from delivery until return, fair wear and tear excepted, and hire charges continue until the loss is settled. In Latvia these conditions have no force of their own – they apply only if incorporated into the contract – but the risk-allocation logic is worth borrowing.
6. Substitute plant and continuing hire charges are two different things
Substitute plant hire cover pays for hiring another machine while yours is under repair. Continuing hire charges cover compensates the owner for the hire income that stops when the machine is damaged. A contractor needs the first; a hire company often needs both, and quotes tend to conflate them.
For substitute plant, four parameters have to be agreed, and I state them in the submission so that the cover does not come back with unusable figures: the waiting period, the daily limit (which must match the real hire rate for that class of machine), the limit per unit and the limit in the annual aggregate.
Three things that look technical in a quote but decide the claim
The sum insured basis. This is the biggest hidden error and it matters more than depreciation. In one wording the sum is the cost of acquiring new equivalent plant, in another the actual value, in a third the client chooses. If the sum is below the required basis, average applies – and the reduction bites on every loss, not only the large ones.
The total loss threshold and deductibles. A machine is normally treated as a total loss once the cost of repair reaches its actual value immediately before the event. And where several units are damaged in one occurrence, many wordings apply a single – the highest – deductible rather than one per machine. I therefore ask for the deductible table by peril separately: damage, theft, natural perils and transit tend to differ.
The notification deadline. In engineering wordings the deadline for notifying a loss is a condition on which cover depends, not a formality. In model policies it is a matter of days. It is worth knowing that number before an incident, not after.
Storage and security: check before you assume the worst
A requirement to keep plant in a guarded or fenced compound outside working hours cannot be met in a forest or an open field, and this is a well-known point of conflict. In Latvia at least one insurer's wording already carves agricultural and forestry machines out of that requirement, replacing it with a general duty of care. So the first step is not negotiation but reading: the requirement may not apply to you at all.
Where it does apply, GPS and an immobiliser are the right conversation – but as risk mitigation affecting the premium, not as a substitute for the requirement. One wording point deserves attention: in many policies theft is not covered if the anti-theft devices fitted were not switched on. That is a requirement performed by the operator, not by the policy.
How to write the submission so the answer is usable
The list is half the work. The other half is how it is written, because that determines whether comparable figures come back or a general letter does. Five points I always include:
- The business profile in one paragraph. Who operates the plant, how it is serviced, where it works, whether it is hired out. Without this the underwriter assumes the worst case.
- Which cover tier is being requested. Named perils or all risks – otherwise the quotes are not comparable.
- The premium for each item separately and in total. Without it you cannot tell what is cheap and what is expensive, and the client cannot buy part of the list.
- If an extension cannot apply to the whole fleet, which units it can apply to. This often reveals that the restriction concerns only a few of the oldest machines.
- A request to leave the base premium and the other terms unchanged. Otherwise a recalculated quote comes back that can no longer be compared with the original.
Two more boundaries worth knowing
Territory. The default in Latvian quotes is Latvia. If the plant travels to a site in Lithuania or Estonia even once a year, the territory has to be extended, and that is priced separately – usually a small percentage of the premium. Far cheaper than discovering the territorial limit after an incident abroad.
Work outside the standard. Underground work, work in and on water, and in some wordings trenchless and directional drilling are excluded unless otherwise agreed. If the business does piling, trenching or trenchless utility installation, that belongs in the submission, not in a post-loss discovery.
Motor cover and CPM: where the line runs
For a machine that both travels on the road and works on site there are two covers, and between them there can be either a gap or an overlap. CPM wordings often exclude road-registered vehicles unless they are used only on site, and road traffic accident damage tends to be excluded unless separately agreed. Motor own-damage cover, in turn, is written around driving, not around the work process.
The practical test is simple: take three situations – the machine driving on the road, the machine being loaded onto a trailer, the machine working on site – and ask which policy responds in each. If any one of the three has no clear answer, that is where the problem is.
Not every insurer wants this segment
Not everyone in Latvia writes CPM. Some insurers simply do not have the product, and appetite for particular segments differs sharply: short-term hire is an unwanted risk segment for one insurer, who will say so directly, and a target client group for another.
There are two consequences. First, one insurer's declinature is not the market's answer, and a fleet is worth putting to everyone who writes the class at all. Second, it changes the negotiating position: an owner-operator has more counterparties and can push extensions more confidently; a hire company has fewer, and there how well the submission is prepared carries more weight.
What to take away
If you work with your own plant:
- Ask for breakdown cover, but narrow the request yourself
- Offer the service history as an argument, not just as a document
- Ask to see the depreciation scale for parts – do not assume it
- Check the sum insured basis and the average condition
If you hire plant out:
- Make sure hiring out is addressed in the policy – by default it is often excluded
- Check there is no requirement to approve each hirer separately
- The hirer-breach clause is a negotiating point, not a given – if it is refused, the hire contract has to carry the risk
- Ask for both substitute plant hire and continuing hire charges
- The hire contract must match the policy: liability, identity checks, deposit
For both: confirm which cover tier you are comparing; establish the deductibles by peril and the notification deadline; schedule attachments separately.
Sources and methodology
This article draws on Latvian insurers' published plant and machinery wordings, international engineering model policies and Kristaps Račko's broking practice; verified on 20 August 2026. The market responses described are generalised and reflect the typical course of a negotiation rather than any named insurer; no client data, policy numbers or premiums are used. Actual cover always depends on the chosen insurer's wording and the special conditions of the policy.
- Published plant and machinery insurance wordings of insurers operating in Latvia
- IMIA and reinsurers' engineering model wordings and technical guidance (CPM/CPE)
- Kristaps Račko's broking practice (18+ years) – assessment of CPM quotes and wordings
Insurance broker, partner at SIA EURORISK. 18+ years in insurance. About me →
This article provides general information and is not individual insurance advice. The actual cover depends on the chosen insurer's wording and the special conditions of the policy.