Equipment Breakdown coverage: health insurance for your machines
As an employer, you can provide your workers with healthcare coverage that insures their well-being and safety. An Equipment Breakdown insurance policy can do the same for the expensive machinery and equipment your business depends on.
What is Equipment Breakdown insurance?
This type of insurance covers loss stemming from mechanical or electrical breakdown of nearly all the machinery your business uses, from laptop computers to backhoes, and beyond. Because this type of coverage offers broader protection than the more traditional Boiler and Machinery (BM) insurance, it’s increasingly being seen as a replacement for BM policies.
Why does my business need this coverage?
Equipment Breakdown insurance provides coverage that other types of insurance usually don’t. Most Commercial Property insurance policies cover damage to your business’ property because of external causes, such as vandalism, fires, or adverse weather events.
Businesses that depend on revenue that can be disrupted by equipment problems — such as restaurants, hotels, malls and shopping centers, manufacturers, tech companies, and entities such as schools, churches, hospitals, and local governments — benefit most from this coverage.
What exactly does Equipment Breakdown insurance cover?
There’s some variability here, depending on the limits of the policy you buy. Generally speaking, while normal wear and tear, software malfunctions, and cybercrime are not covered, Equipment Breakdown usually does cover events such as electrical shorts, power surges, and motor burnout, as well as damage caused when someone operates the equipment incorrectly. Expenses incurred for repair or replacement of broken equipment are also usually covered, along with any property damage the breakdown might cause.
These policies will often cover loss of business income and extra expenses caused by equipment failure, including food spoilage, accidental damage to someone else’s property, added cost for building code compliance, and costs associated with demolition. You can also buy extra coverage that protects you if you rent equipment — either to replace damaged machinery or to keep the business running while repairs to your existing systems are underway.
Systems covered by Equipment Breakdown insurance often include:
- Boilers and HVAC systems
- Computers and phones
- Electrical cables and transformers
- Elevators and escalators
- Manufacturing equipment
- Motors, engines, elevators, and water pumps
- Production systems for machining tools, food processing, and robotics
- Refrigeration equipment
- Retail point-of-service devices
- Security and fire alarm systems
What will Equipment Breakdown insurance cost?
The cost for a policy depends on the size of your business and the equipment that will be covered. Cost is also affected by whether the coverage you buy is a stand-alone policy or a supplement to your Businessowners policy, which combines various coverage types, including General Liability, Commercial Property, and Business Interruption. Adding Equipment Breakdown to your Business Owners package may net you an additional discount.
The information included here was obtained from sources believed to be reliable, however Grinnell Mutual Reinsurance Company and its employees make no guarantee of results and assume no liability in connection with any training, materials, suggestions, or information provided. It is the user’s responsibility to confirm compliance with any applicable local, state, or federal regulations. Information obtained from or via Grinnell Mutual Reinsurance Company should not be used as the basis for legal advice and should be confirmed with alternative sources.
Sources: Forbes Advisor, International Risk Management Institute
10/2023