What Is Equipment Breakdown Insurance?

If equipment fails, which is very important for your small business – for example, refrigerators in your restaurant fail after a power outage – it can be harmful and expensive. Equipment breakdown insurance can alleviate financial pain.

That’s why it’s wise to include equipment breakdown coverage in small business insurance.

How does equipment breakdown insurance work?

Equipment breakdown insurance (sometimes known as boiler and machine insurance or mechanical breakdown insurance) is an additional coverage for business owners. Typically, this helps pay for repairs or replacement of equipment that is suddenly damaged or unexpectedly stopped working.

For example, the cause of a breakdown may be a short circuit that is not covered by a standard commercial property insurance policy.

Equipment breakdown insurance covers internal faults due to mechanical or electrical problems such as:

• Electric shorts
• Mechanical breakdowns
• Engine overheating
• Voltage drops

It can also cover damage due to someone mishandling the equipment.

Why do I need equipment breakdown insurance?

Equipment breakdown insurance is important because it covers problems that preclude other types of coverage.

For example, commercial property insurance usually does not cover mechanical failures or equipment failures. Commercial property insurance covers damage to your business property as a result of external incidents such as fires, vandalism and wind.

The same applies to business interruption insurance – it will not apply in these cases because it helps to regain lost income after problems such as fire.

What does equipment breakdown insurance cover?

Equipment breakdown insurance can cover a variety of accidentally damaged or destroyed equipment. For business owners, equipment breakdown insurance usually covers items such as:

• Boiler systems
• Computers and phones
• Electrical cables and transformers
• Elevators and escalators
• HVAC systems
• Production equipment
• Engines, motors, elevators and water pumps
• Production systems such as machining tools, food processing equipment and robotics
• Refrigerators and refrigeration equipment
• Retail service point devices
• Security and fire alarm systems

In addition to paying for repairs or replacement of equipment covered by the policy – up to the limits of the policy – equipment breakdown insurance can also compensate you:

• Spoilage of food
• Lost business profits due to breakdowns
• Additional costs for temporary or urgent repairs
• Liability for damage to property or accidental damage to another’s property as a result of breakage
• Equipment inspection due to breakage required

Equipment breakdown insurance can also cover the aftermath of an incident covered by your policy. For example, equipment breakdown insurance from Hartford Steam Boiler (HSB) covers:

• Additional costs for compliance with building codes
• Depreciation costs
• Additional associated costs, such as equipment rental
• Lost profits if you choose to sell a damaged item for less than its full brand value
• Portable equipment is damaged off-site
• Lost business profits and additional costs if contract equipment fails

What is not covered by equipment breakdown insurance?

Equipment breakdown insurance usually does not cover normal wear and tear. For example, if your 20-year-old refrigerator just fails because of its age, equipment breakdown coverage won’t pay for a new one.

And although hardware failure insurance covers computer equipment, it usually does not cover software failures, data theft, or cyberattacks. To cover the software, you usually need to purchase cyber liability insurance.

Who should buy equipment breakdown insurance?

Organizations that may want to consider equipment breakdown insurance include:

• Manufacturers
• Technical companies
• Mini-shops
• Restaurants
• Local governments
• Schools
• Hospitals
• Hotels
• Churches
• Retailers
• Shopping malls

For such organizations, equipment breakdown insurance can be especially valuable if they are heavily dependent on income that may be affected by the breakdown.

How much does insurance against equipment failure cost?

Equipment breakdown insurance for businesses costs about $ 800 a year, according to Assured Standard, a company that sells business insurance.

Exactly what you pay for depends on whether you buy a separate policy or additional business owner policy (BOP), the size of your business and the type of equipment you have, among other factors.

BOP combines the valuable coverage that every small business should have: general liability insurance, commercial property insurance and business break coverage. But you can add more protection to your PB by buying additional types of insurance, such as equipment breakdown insurance.

Adding equipment breakdown insurance to your PB can lead to a price drop as you combine it with your shared liability and property insurance.

Tips for buying equipment breakdown insurance

If you are buying equipment breakdown insurance, ask the following questions before agreeing to coverage:

• How much is the coverage?
• What is covered?
• What is not covered?
• What are the coverage limits?
• How much are franchises?

How to report equipment failure

If you have equipment breakdown insurance, here are some recommended steps to follow if you need to file a claim:

• Contact your insurance company.
• Review the equipment breakage policy.
• Document damage in writing, photos and videos.
• If possible, leave damaged equipment and parts in place so insurance investigators can inspect them.
• Try to protect the equipment from further damage.
• Compile documents and data for the claim.