Condominium associations rely on a variety of mechanical and electrical systems to keep their buildings safe and functional. From elevators and air conditioning systems to sprinkler pumps and generators, unexpected equipment failures can lead to significant repair costs and even loss of income for the association.
That’s where Equipment Breakdown Insurance comes in. This specialized policy helps cover the cost of repairs or replacements when essential building equipment fails due to a mechanical or electrical breakdown ensuring your condo community remains operational and financially protected.
What Does Equipment Breakdown Insurance Cover?
Equipment Breakdown Insurance covers physical loss or damage to essential systems that require repair or replacement due to an unexpected failure. This typically includes:
- Electrical failure (i.e. arcing and power surges)
- Mechanical failure (including rupture or busting caused by centrifugal force)
- Pressure or vacuum system failures
For condo associations, this means coverage for equipment essential to both daily operations and resident safety.
Commonly Covered Condo Equipment:
✅ Elevators & lift systems
✅ HVAC units & air conditioners
✅ Generators & backup power systems
✅ Electrical panels & transformers
✅ Fire alarm annunciator panels
✅ Sprinkler & fire suppression pumps
✅ Security systems
✅ Water pumps & boilers
✅ Intercom & phone systems
✅ Computers & servers for association operations
What’s NOT Considered a Breakdown?
While Equipment Breakdown Insurance is comprehensive, it does not cover everything. Policies typically exclude:
🚫 Wear & tear, corrosion, or deterioration
🚫 Routine maintenance costs
🚫 Damage from fire, flood, or natural disasters (which is typically covered under Property insurance)
🚫 Cracking due to combustion
🚫 Defects
🚫 Malfunction, including adjustment or alignment
🚫 Software issues, viruses, or programming errors
🚫 Leaks from pipes, valves, or fittings
Understanding these exclusions ensures your association isn’t caught off guard when an uncovered loss occurs.
How Can a Condo Association Obtain Equipment Breakdown Coverage?
Condo associations have a couple options to secure Equipment Breakdown Insurance, ensuring protection for essential building systems:
1. Add an Equipment Breakdown Endorsement
Some Property Insurance policies allow associations to add Equipment Breakdown as an endorsement. This is the most common and cost-effective method for many communities.
2. Stand-Alone Equipment Breakdown Policy
If your property insurer does not offer Equipment Breakdown, or if your condo has high-value mechanical systems, a separate stand-alone policy may provide broader protection.
What Is the Difference Between Boiler & Machinery and Equipment Breakdown Insurance?
Historically, Boiler & Machinery (B&M) Insurance was developed in the 1800s when steam boilers were widely used as a primary energy source for businesses. If a boiler failed, it could result in costly repairs, business interruptions, or even catastrophic explosions. To mitigate these risks, insurers introduced Boiler & Machinery Insurance to cover breakdowns and related damages.
Over time, as businesses became more reliant on electrical, mechanical, and computerized equipment, the coverage evolved beyond just boilers. This broader protection is now known as Equipment Breakdown Insurance, which covers a wide range of modern systems including HVAC units, generators, elevators, electrical panels, and fire suppression systems.
Why Condo Associations Need Equipment Breakdown Insurance
Without proper coverage, your condo association could face substantial out-of-pocket costs when critical building systems fail. For example:
🔹 An elevator motor burns out due to an electrical surge, requiring a $30,000 replacement.
🔹 A backup generator fails during a hurricane, leading to spoiled food, resident complaints, and emergency repairs.
🔹 An HVAC compressor ruptures, causing a $15,000 mechanical repair bill.
🔹 The air conditioning system in a high-rise condo malfunctions during peak summer, leading to overheated units, resident discomfort, and urgent repair expenses.
🔹 The condo’s intercom and phone system go offline due to an equipment failure, preventing residents from buzzing in guests or contacting security.
Standard property insurance does not cover these types of failures unless caused by an insured peril (i.e. fire, lightning, or windstorm). That’s why Equipment Breakdown Insurance is an essential safeguard for condominium associations.
Top Insurance Carriers for Equipment Breakdown Coverage
Many insurance providers offer Equipment Breakdown coverage as an endorsement, while some specialize in stand-alone policies. Popular carriers include:
✅ Chubb
✅ C.N.A.
✅ Liberty Mutual
✅ Munich Re
✅ Travelers
If you’re unsure whether your condo association has the right coverage, it’s important to review your existing policy and consult with an agent that understands condo associations. Your condo association can’t afford to go without essential building systems. A sudden equipment failure can lead to costly repairs, legal liabilities, and major disruptions for residents.
📞 Contact our commercial insurance specialists at Insurance Resources today to learn more about Equipment Breakdown Insurance and get a customized quote for your condominium community.
