E&P companies in the oil and gas extraction industry typically do not own their own drilling rigs or equipment, nor do they employ dedicated drilling crews. Instead, they rely on drilling contractors and service companies to handle well drilling operations, including providing rigs and experienced personnel.
Drilling and completion operations involve high-risk, complex processes. Drilling contractors face daily exposure to hazards such as mechanical breakdowns, equipment failures, fires, and severe weather. These incidents can lead to significant project delays and financial losses due to downtime or damage to specialized rigs and tools.
Oil Drilling Rigs and Well Servicing Equipment (Valued U and O) Insurance helps protect against financial and physical losses tied to machinery and equipment. This coverage typically pays for repair or replacement of damaged equipment and compensates for lost income due to work stoppage or slowdowns caused by insured equipment breakdowns.
What is Oil Drilling Rigs and Well Servicing Equipment (Valued U and O)?
This specialized form of insurance protects owners and operators of oil drilling and well servicing equipment from financial loss due to physical damage and operational interruptions. “Valued U and O” refers to “Valued Use and Occupancy,” which means the policy can cover not only the equipment itself but also the loss of income tied to its use.
Who Needs It
This coverage is essential for businesses that own, operate, or lease oil drilling rigs and related machinery, including:
- Drilling contractors
- Well servicing companies
- Equipment rental providers
- Oilfield service firms
What It Typically Covers
Oil Drilling Rigs and Well Servicing Equipment Insurance may include protection for:
- Physical damage to rigs and related machinery due to fire, explosion, or natural disasters
- Mechanical breakdowns and equipment failure
- Loss of income from project delays or shutdowns linked to insured equipment
- Costs for repair or replacement of covered equipment
Common Exclusions and Limitations
While coverage is broad, most policies exclude certain risks, such as:
- Normal wear and tear or gradual deterioration
- Damage from unapproved modifications or unauthorized use
- Acts of war or intentional damage
- Losses not specifically tied to insured equipment
Factors That Influence Cost
Several factors affect the cost of this insurance, including:
- Value and type of equipment covered
- Geographic location and operating environment
- Claims history and risk management practices
- Scope of coverage and policy limits
Proof of Insurance and Compliance
Having proof of insurance is often required when bidding on contracts or operating in regulated environments. While requirements vary by state and client, maintaining proper coverage helps demonstrate operational responsibility and financial stability.
How to Get a Quote
To find the right protection for your oilfield operations, get started with a customized quote for Oil Drilling Rigs and Well Servicing Equipment Insurance. Get a quote today.
Frequently Asked Questions
What does "Valued Use and Occupancy" mean in this coverage?
It refers to coverage that not only protects the physical equipment but also compensates for lost income when the equipment cannot be used due to an insured event.
Does this policy cover leased drilling rigs?
Yes, coverage can extend to leased rigs as long as they are listed on the policy and meet underwriting requirements.
Are natural disasters like hurricanes covered?
Yes, many policies cover damage from natural disasters, but it’s important to review the policy details for any specific exclusions or deductibles.
Is coverage available for rigs operating offshore?
Coverage for offshore rigs may be available but often requires specialized underwriting. Be sure to disclose all operational environments when applying.
How do I file a claim if equipment breaks down?
Contact your insurer as soon as possible with details of the incident, including documentation of the damage and any operational impacts. Your policy will outline the exact steps for claims processing.
Still have questions? Talk to a local insurance expert.