Equipment Breakdown insurance, sometimes referred to as Boiler and Machinery insurance, covers sudden, accidental damage to your electrical, mechanical and other equipment that commercial insurance normally doesn’t.
Until recent years, equipment breakdown insurance was only seen as a necessity for manufacturing, processing, wholesaling, and other large operations. Times have changed, and equipment breakdown coverage is now a necessity for many type of small businesses as well. Today, nearly every business, large and small, relies on some piece of technology or electrical equipment to function.
Equipment Breakdown insurance covers 5 specific types of property loss or damage normally not covered by commercial insurance. These are:
Protection against equipment breakdown is critically important for businesses relying on these types of equipment to keep operations running efficiently and without interruption.
Depending on your policy, indirect damage as a result of equipment breakdown may be included or available as endorsements, such as for business interruption, food spoilage, and more. Always speak with a broker to assess your risks and avoid potentially costly gaps in your coverage.
The main difference between equipment breakdown coverage and regular commercial insurance in the source of damage. Commercial property insurance will normally protect you from external perils such as fire, wind, or vandalism, whereas equipment breakdown insurance will cover internal forces, such as mechanical breakdown, power surges, electrical short circuits, and operator error.
No, wear and tear is not covered by equipment breakdown insurance, as it does not constitute sudden, accidental damage,i.e., the result of an unexpected and non-deliberate action. Also excluded from equipment breakdown coverage are lack of maintenance, corrosion, decay, deterioration, and hidden defects that cause property damage.
There are a few issues with relying on extended warranties to cover your equipment. The coverage offered by warranties is often limited to certain parts of the equipment and for a limited time, with breakdowns usually occurring long after the warranty expires. Another significant consideration is that warranties typically don’t cover operator error, so if you’re found to be responsible for damage, you won’t be covered. Equipment breakdown is a safer a more cost-effective solution.
Boiler and machinery insurance and equipment breakdown insurance are interchangeable; however, the former has largely fallen out of use, since ‘equipment breakdown’ is a more appropriate term for today’s coverage. This type of coverage now includes a broad range of modern technological equipment, well beyond just boilers and machinery.