Equipment breakdown insurance protects equipment, including electrical, mechanical and computer equipment, against damage or breakdown as an optional part of a commercial insurance policy.
If your small business uses equipment – such as computer systems, telephone systems, refrigeration or manufacturing equipment – to operate, you can choose equipment breakdown coverage as part of your business insurance policy for help keep this equipment in good working order and cover any loss of income if it breaks down.
This is an optional selection that may cover the cost of repairing or replacing damaged equipment, but only if the incident that caused the damage or failure is covered by the policy, and only if the type of equipment was covered by the policy.
Some insurance companies call this coverage Boiler and Machinery Insurance or Mechanical Breakdown Insurance. These are older terms for coverage and are becoming obsolete as computers and electrical systems become more important to the daily operations of more and more businesses.
Read on to find out why you might need equipment breakdown coverage and how it works.
Why is equipment breakdown coverage important?
Most small businesses use some form of equipment as part of their core business offering. Whether it’s the washers and dryers in a laundromat, the refrigerators and ovens in a restaurant, or the bottling equipment in a brewery, this equipment is part of the daily operation of the business. Even small businesses that work primarily from household equipment like computers and phone systems that are essential to reach their customers. The problem is that accidental damage to this equipment may not be covered by home insurance or other policies.
Equipment breakdown coverage can help keep your business afloat if an accident occurs that damages your equipment. Not only does this additional insurance cover the cost of repairing or replacing damaged equipment; it can also cover lost revenue if you have to close and replacement costs for spoiled inventory. It even covers issues caused by operator error, so if one of your employees accidentally breaks your equipment, you can cover the loss while repairing it.
This additional coverage may also cover costs that your business owner’s property policy, liability insurance and other coverage options do not cover. Your insurance agent can help you understand what’s covered and what’s not, and how to file a claim in the event of an accident.
What does the equipment breakdown warranty cover?
Equipment failure coverage covers the cost of repairing or replacing specific types of failure or damage to property for specific reasons. Be sure to check with your insurance agent to verify what equipment is covered by your specific policy and why, but here are some general features of most policies.
Types of Equipment Covered by Equipment Breakdown Coverage
Equipment breakdown coverage will cover your mechanical, electrical and computer equipment against damage and breakdowns. Covered equipment includes:
- Water pumps and sump pumps
- Water heater
- Manufacturing equipment
- Electrical systems
- Electrical panels
- Informatic Systems
- Telephone and voice mail systems
- Fire alarms and security systems
- Air Conditioners and HVAC Systems
- Fridges and Freezers
- Boilers and pressure equipment
When you file a claim with your insurance provider and they approve it, equipment breakdown coverage will help pay for the cost of repairing equipment, including time and labor. labor or any expenses you incur in repairing it. If repair is not possible, they will cover the cost of replacement.
How You Can Use Equipment Breakdown Coverage Reimbursement
You can also use this coverage to cover lost business income and damaged inventory, depending on your claim.
So, for example, if you’re running a bakery and a power surge causes you to lose power for a day or more, you could lose eggs, milk, and other refrigerated items during the power outage. You may also lose business income because you cannot use your computer system to record your purchases.
What if your air conditioning system stops working due to the ensuing power outage and you have to close the bakery because you can’t maintain a constant, comfortable temperature for your employees or your clients ? What if your ovens aren’t working and you can’t produce fresh baked goods to sell? You would also lose revenue from all these interruptions.
If the power surge damages your computer system or other electrical equipment like your refrigerators, you could lose even more business revenue while you wait to replace or repair that equipment. If your electrical systems or transformers experience short circuits, there can also be property damage. And you may have to pay a specialist for parts and labor to fix everything.
Equipment breakdown insurance would cover the costs of damage, loss of revenue and repair. Different equipment failure policies may cover
Events covered by the equipment breakdown guarantee
Only certain events causing damage or breakdowns to your equipment will be covered by the insurance. Generally speaking, material breakdown insurance covers internal forces, such as:
- Electric shorts
- Mechanical failures
- Motor grill
- Operator error
Your insurance company may require an investigation to ensure that the breakdown or damage was accidental and unexpected.
What is not covered by equipment breakdown insurance?
Not all cases of breakdown or repair of your equipment are covered by equipment breakdown insurance. If your equipment malfunctions due to normal wear and tear, old age or damage caused by negligence, this will not be covered by your policy. This includes damage caused by rust, corrosion or mold or damage caused by rats, mice or insects. Software on your computer systems will also not be covered by the policy.
If your equipment is destroyed due to a natural disaster, such as flood, fire or storm, equipment breakdown coverage will not cover damage or repairs. You will need specialized insurance for these cases. You can also talk to your insurance provider about your insurance coverage on your commercial property insurance when you buy it. If your commercial property insurance and equipment breakdown insurance don’t cover damage or breakdowns to your equipment, you can also check your warranty.
If the accidental damage was caused by operator error, your equipment breakdown insurance will not cover the cost of medical treatment for employee or customer injuries. Your business owner’s policy or liability insurance should cover these issues.
Does commercial property insurance cover equipment?
In a word: no. At least, not usually. Commercial or professional property insurance can protect your equipment against damage to your property such as a tornado, hailstorm or fire, but it will not cover major events covered by equipment breakdown insurance. So if you experience engine failure, operator error, or other accidental and unexpected damage, you’ll want to look to your equipment failure coverage.
Equipment breakdown coverage can be a good idea if you use equipment to run your business. You may be able to add it to an existing business owner’s insurance policy or make sure you have it when you start your business or purchase new equipment. It can be a lifesaver for any small business that could lose revenue or inventory due to accidental damage and equipment failure.
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