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EQUIPMENT BREAKDOWN INSURANCE

Equipment breakdown insurance pays for damage by an electrical or mechanical breakdown to your business’ equipment, such as air conditioners, machinery, generators, and more. Equipment breakdown policies can also cover the loss of income your business incurs as a result of a breakdown.

What is a Breakdown?

Most Equipment Breakdown policies define a “breakdown” as physical loss to equipment that necessitates its repair or replacement.

Typically, the breakdown must occur due to the following:

  • Electrical failure including arcing
  • Failure of pressure or vacuum equipment
  • Mechanical failure including rupture or bursting caused by centrifugal force

However, breakdown does not mean or include any of the following:

  • Cracking due to combustion
  • Tube damage
  • Defects, errors, limitations, or viruses
  • Valve or fitting leakage
  • Malfunction including adjustment & alignment

What Types of Equipment Are Covered by Equipment Breakdown?

The great thing about Equipment Breakdown policies, is how versatile they are in covering most of the equipment your business has. Whether your business is a medical facility with expensive x-ray machines or a condo association with an elevator, generator, and sprinkler system, an equipment breakdown policy can provide valuable coverage to keep your business running.

Below is a list of common equipment that would be covered under an Equipment Breakdown policy:

  • Motors
  • Engines
  • Generators
  • Elevators
  • Electrical panels
  • Electrical equipment
  • Transformers
  • Water & sprinkler pumps
  • Sprinkler annunciation panels
  • Computers
  • Servers
  • Phone systems
  • Air conditioners
  • Pressure equipment
  • Boilers

How Do You Get Equipment Breakdown Insurance?

When it comes to purchasing coverage, there are a few options. For small businesses, the most common way to get coverage is by adding an Equipment Breakdown endorsement to your Business Owner’s policy. This is typically the easiest and most affordable way to get coverage.

However, often times businesses have a stand-alone Commercial Property policy since they may not qualify for a Business Owner’s policy. This is typical of risks with large property values, property exposed to the coast, and businesses with more risky operations. Some Property carriers allow the insured to add an Equipment Breakdown endorsement similar to the Business Owner’s approach.

However, if the Property carrier cannot offer Equipment Breakdown coverage, either due to carrier limitations or due to the type of operations of the business then a stand-alone Equipment Breakdown policy may be best. Stand-alone policies do allow for more customization and may be more appropriate for businesses with large values of machinery and equipment.

Exclusions of an Equipment Breakdown

An Equipment Breakdown policy is meant to cover breakdown, not other types of physical damage. Therefore, policies typically exclude loss due to fire, lightning, aircraft, riot, explosion, and other perils covered by a Property policy. They also exclude certain perils that are also excluded by Property policies such as water (including flood), earth movement, nuclear hazard, and war or military action.

Equipment Breakdown policies also include more specific exclusions that business owners need to understand so they are not surprised by a non-covered claim. Below are some of these unique exclusions:

  • Wear & tear
  • Corrosion
  • Erosion
  • Decay
  • Rust
  • Depletion
  • Deterioration
  • Fire or combustion explosion
  • Spoilage
  • Neglect
  • Testing equipment

What is the Difference Between Boiler & Machinery and Equipment Breakdown Insurance?

In the 1800’s, most businesses used steam boilers as their main source of energy. If those boilers broke down, businesses would be out a lot of money. Around this time, boilers and machinery insurance came about. Nowadays businesses are more reliant on machinery, so Boiler & Machinery has evolved and is now called Equipment Breakdown insurance. Technically Equipment Breakdown is broader than Boiler & Machinery insurance, but in the industry the terms are often used synonymously.

What Carriers Offer Breakdown Coverage?

Many carriers offer Equipment Breakdown by endorsement, but there are a few carriers that specialize in underwriting stand-alone policies. The carriers we most often see in this realm are the following:

As you can see Equipment Breakdown is a valuable coverage for businesses of all shapes and sizes. If you’re interested in learning more about coverage, or if you would like to determine the pricing for your business, please contact our commercial agents at Insurance Resources.

Equipment That Can Be Covered:

  • Motors
  • Engines
  • Generators
  • Elevators
  • Electrical panels
  • Electrical equipment
  • Transformers
  • Water & sprinkler pumps
  • Sprinkler annunciation panels
  • Computers
  • Servers
  • Phone systems
  • Air conditioners
  • Pressure equipment
  • Boilers
Equipment Breakdown
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