Equipment Breakdown Coverage

What is equipment breakdown coverage?

Equipment Breakdown (EB) coverage (or mechanical breakdown insurance) is coverage of a loss due to mechanical or electrical breakdown of equipment. It used to be referred to as ‘Boiler and Machinery Insurance’ but is now generally categorized as the broader term. 

What equipment is included in coverage?

These are just a few of the examples of items covered: 

• Boilers and furnaces
• Computer equipment
• Phones and communication devices
• Heating and air conditioning systems
• Refrigeration systems
• Home security systems
• Home entertainment systems

The policy usually covers the cost of replacing or repairing the above items, including time and labor associated. If there was food spoilage, that will be considered as well. Lost income is also covered under these policies. 

In this day and age, almost every business relies on computers and phone systems for the daily operation of the business. If a power surge shuts down these systems or wipes them out—will you be prepared?

Examples of covered losses

• The motor inside your commercial refrigerator burns out and needs to be repaired. The cost to repair—including labor—as well as food spoilage and product loss is covered. 
• If an electrical surge damages computer equipment or telephones the policy can cover repair or replacement. 
• Your air conditioning system malfunctions because a fuse is blown and the cost of repair is covered. 

What equipment is excluded from coverage? 

It’s important to understand this coverage is ‘hardware’ and not software coverage for your computers, phone systems, etc. For example—a virus or bug which causes computer failure is not covered, but a power surge that damages a motherboard would be. What else is excluded from coverage?

• Normal wear and tear due to aged equipment
• Deterioration of equipment caused by rust, corrosion, or mold
• Equipment that wasn’t properly stored or taken care of
• Property that was damaged by pests

Doesn’t my property insurance cover this?

Many business owners believe their property insurance would cover these claims—only to find out it’s not covered. Property insurance covers damages from external causes such as fire, flooding, or a tree falling into your building. These policies don’t cover internal causes like an electrical or mechanical failure. This is where equipment breakdown insurance is necessary. Equipment breakdown coverage is often purchased in conjunction with property insurance. 

Does your business need equipment breakdown coverage?

Here are some examples of businesses that should purchase coverage: 

• If you own a restaurant or a food processing plant where damage to refrigeration units can leave you with a significant loss.
• You own a building with numerous employees with countless computers and phone systems.
• You own a machine shop with expensive machinery/tools and equipment that may be negatively impacted by mechanical or electrical breakdowns.

If you think your small business may benefit from this type of insurance, be sure to connect with an agent for more information. 

How do you get equipment breakdown insurance?

Just like any other insurance policy, there is a limit—or maximum amount—that a policy will cover per claim submitted. If there are costs that exceed this maximum, you will be responsible for the coverage. The amount of coverage that is necessary varies from business-to-business but is typically affordable in comparison to the coverage you receive. We recommend connecting with your commercial insurance agent or speaking to one of our qualified agents about the coverage minimums necessary and the cost of the policy.