Many property owners mistakenly believe that their building's installed equipment is covered by their property policies. Equipment breakdown is not covered by the typical property policy, which may cover the building, its contents, and possible lost revenue in the event of a loss.
Property owners need an Equipment Breakdown policy, which is specifically designed to cover the loss exposures for the systems and equipment installed in their buildings, in order to prevent a coverage gap.
The term "Equipment Breakdown" was once known as "Boiler and Machinery Coverage," but it was changed to better reflect the broadened coverage of covered equipment.
What Is Equipment Breakdown Coverage?
Equipment breakdown coverage protects your company from the costs and lost income caused by unexpected damage and failure of important business equipment. This insurance covers ovens, heating, ventilation, air conditioning (HVAC) systems, cooling systems, diagnostic devices, and computer equipment. Small company insurance packages with selected equipment breakdown coverage often cost about $800 per year.
Because equipment breakdown coverage is rarely considered when obtaining business insurance plans, it is frequently omitted. Most businesses face financial ruin as a result of malfunctioning machinery, but this does not have to be the case with equipment breakdown coverage choices.
When equipment is lost or damaged, equipment breakdown insurance covers both physical and financial losses. It combines business property coverage with business interruption insurance. Most small company owners want equipment breakdown insurance to protect the equipment on which they rely to run a business.
As aforementioned, HVAC systems, diagnostic machines, computers, photocopiers, refrigeration systems, generators, and any other systems required for standard company operations are all covered by equipment breakdowns. Owners who do not have equipment Breakdown coverage are self-insuring massive loss risks to their property.
What Does Equipment Breakdown Insurance Cover?
Equipment breakdown insurance is designed to protect the equipment that a firm needs to function. Most equipment breakdown coverage, however, is quite particular in the endorsements and does not include interruption of utility services or loss of company income. It exclusively covers machine repair and replacement.
To be completely insured, the policy must provide appropriate coverage for all risks connected with a business interruption.
Equipment breakdown insurance protects your company against damages caused by:
v Electrical Systems
Electrical systems, which can be a considerable investment in the overall building value, are vital for any organization's routine operations. A failure of an electrical system can have an impact on both company and workers. Due to the interconnected nature of transformers, panels, and electrical systems, a short circuit can quickly expand and destroy huge areas of the system.
The most common expenditures associated with this type of loss include system repairs, generator rental, and income loss owing to building inaccessibility.
v Air Conditioning And Refrigeration
Breakdowns in air conditioning and refrigeration can lead to business closures, spoilage difficulties, and revenue loss for both company and workers. This equipment seems to go down at odd times, and repairs can be costly. Because HVAC units are frequently positioned on the building's roof, replacement may necessitate the use of a crane or helicopter.
Breakdowns during a heat wave may necessitate additional expenses and revenue loss, such as closing a restaurant, relocating hotel guests, or sending employees’ home and shutting down operations until repairs are done.
v Boiler and Machinery
Explosion, cracking, collapse, and bulging are all possible in boilers and pressure vessels. Any of these can cause a building to lose hot water or heat, necessitating the owners to arrange for temporary equipment as well as repairs or replacement of permanent equipment. The insurance provider will provide annual checks of insured boilers to ensure that they fulfill jurisdictional standards, which is an appealing benefit of the Equipment Breakdown coverage.
v Electronic Technology Systems
The Equipment Breakdown coverage protects sensitive electronic equipment from harm caused by a power surge. A surge can affect phone systems, computers, satellite systems, retail systems, security and fire alarms, and other electronic technology in addition to the apparent electrical equipment outlined above.
Surge protection devices are frequently insufficient, protecting only computers and not the other items that can be damaged by a power surge.
v Mechanical Equipment
Elevators, escalators, motors, water pumps, ventilation fans, engines, and most other mechanical equipment used to run your building are examples of mechanical equipment. A breakdown can immediately put an organization in jeopardy. Workers in a high-rise building may be inconvenienced or trapped if the elevator system fails.
What Does Equipment Breakdown Insurance Not Cover?
Typically, the following are not covered by equipment breakdown insurance:
- Software systems: Software systems are not included, only computer hardware. To secure software, you should buy cyber liability insurance.
- Wear and Tear: Equipment breakdown insurance does not cover breakdowns that happen as a result of the equipment's age or normal wear and tear.
- Natural disasters: Equipment failures brought on by fires, storms, explosions, and other natural catastrophes are covered by your commercial property insurance or specialized insurance, such as flood insurance.
Although it's difficult to think of a firm that doesn't use computers or other technology, service providers like plumbers and dog walkers might not. To get the right coverage for your company's needs, go over your options with your insurance provider.
Who Benefits the Most From Equipment Breakdown Coverage?
Businesses largely depend on their equipment to run daily operations as technology advances. Additionally, there are additional opportunities for mechanical failure. You might feel more confident that you can handle the unexpected if you have equipment breakdown coverage.
Note the equipment you depend on when deciding whether to purchase equipment breakdown insurance. You should also consider how their failure can impact your revenues.
Coverage can rescue you from catastrophic consequences in some businesses. A faulty fax machine in the office is not as serious as a commercial refrigerator failing in a restaurant. If a malfunction may limit your ability to generate money, it may be worthwhile to consider purchasing equipment breakdown coverage.
Who Needs Equipment Breakdown Insurance? Here are a Few Common Examples:
- A restaurant needs refrigerators to remain fully functional
- An information technology (IT) company relies on servers and computers
- A manufacturer uses equipment to produce products.
- A small print shop needs photocopiers to run
- A mechanic requires a hydraulic lift to work on automobiles.
How Much Does Equipment Breakdown Insurance Cost?
The cost of equipment breakdown coverage is calculated by the equipment's worth and the possible income loss. When coverage is included in a larger policy, small business owners save money since the risk is already reduced by other policy provisions, such as fire loss or utility interruption.
The majority of insurance providers base the cost of equipment breakdown coverage on the cost of the insured items. It may cost $25 to $50 for $50,000 of equipment coverage on an annual basis. Requesting quotes from several insurance providers is the most effective way to find out the exact cost of equipment breakdown insurance.
Is Equipment Breakdown Coverage Worth It?
The majority of small firms employ equipment as part of their core product or service. This equipment is necessary for the day-to-day running of the business, whether it be the washers and dryers in a laundry, the refrigerators and ovens in a restaurant, or the bottling equipment for a brewery.
Computers and phone systems are used by even small businesses that operate mostly from their homes in order to communicate with their customers. The issue is that either homeowners' insurance or other plans might not provide coverage for unintentional damage to this equipment.
If an accident occurs that destroys your equipment, equipment breakdown coverage may be able to assist you to maintain your business. This additional coverage can also cover lost revenue if you have to shut down and replace expenses for spoilt goods in addition to the cost of repairing or replacing the damaged equipment.
It even covers problems brought on by operator mistakes, allowing you to cover losses while having your equipment fixed if one of your staff accidentally destroys it.
Equipment breakdown coverage may also cover expenses not covered by your liability insurance, business owner's property policy, or other coverage choices. Your insurance agent can explain what is and isn't covered, as well as how to make a claim if an accident occurs.
Damage to insured equipment and the associated loss of business revenue are covered by the Equipment Breakdown policy. Any company that relies on equipment should think about purchasing equipment breakdown insurance.
Most equipment is costly to replace, and the period when small business is unable to operate as a result of equipment failure results in revenue loss. Equipment breakdown insurance is a low-cost solution that enables business owners to replace earnings, repair equipment, and keep their business going.