Equipment Breakdown Coverage: Definition, Coverage & Cost

Equipment Breakdown Coverage 
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Equipment breakdown insurance, one of the essential BOP coverages, guards your firm’s mechanical, electrical, and technological assets from unplanned failures. Let’s get to know more.

Equipment Breakdown Coverage 

Equipment breakdown coverage is an essential small business insurance policy. It protects your company’s property and equipment in the event of an unexpected failure. This coverage is included in commercial property insurance, which can be purchased alone or as part of a Business Owner’s Policy (BOP).

Likely, you’re already familiar with plans like liquor liability insurance and food spoilage insurance if you’re a business owner in the food and beverage industry. These plans safeguard your company, and equipment breakdown coverage is no exception. So, what exactly is it? 

Equipment breakdown coverage is basically what it sounds like: protection against malfunctioning equipment. This equipment can range from walk-in refrigerators to stoves, HVAC units, and computer systems. Still, it rather refers to the equipment that your bar or restaurant relies on regularly. 

Equipment breakdown coverage is essential because if your equipment fails, your business may lose money until it is repaired. Overall, the expenses of repairs and replacements include significantly more than just the repairs or replacements themselves. 

Equipment breakdown insurance can help protect your business’s assets.

  •  Mechanical devices
  • Computer networks
  • Appliances
  • Power supply systems

Home Equipment Breakdown Coverage 

What is covered varies based on particular plans, whether equipment needs to be fixed or replaced, and whether other losses occurred due to the initial breakdown. Equipment breakdown coverage often protects the equipment needed to run your business. It could, for example, cover: 

  • The cost of repairing or replacing your equipment. Consider stoves, walk-ins, and fryers. 
  • The cost of spoiled food or inventory. If your walk-in fails, your inventory may be compromised. 
  • The expense of repairing or replacing computer or POS systems and restoring data
  • Equipment breakdown coverage typically covers these costs and the labor required for repairs or installation until your home’s appliances return to normal. 
  • Air conditioning issues, such as the device not blowing cold air and properly cooling your building
  • Phone system if you’re not able to send or receive calls.
  • Elevators that stop working properly
  • Manufacturing machine if it fails to start after a motor burnout,
  • Electrical panels and circuit breakers that fail to function during a power surge

Because every circumstance differs, you must consult your local society agent about specific conditions and coverage possibilities.

Equipment Breakdown Coverage Commercial Property 

There are countless dangers to owning and operating any commercial property—hotel, office block, shopping mall, bakery— One commonly ignored risk is the unexpected failure of critical equipment and machinery. A power surge, defective circuit, a loose bolt, or simple human error can all cause an equipment failure, stalling or entirely suspending operations.

In other cases, broken equipment may be a slight annoyance. In other circumstances, the damage could cost tens of thousands of dollars in repairs and income lost due to severe business operations delays. Equipment breakdown insurance guarantees that businesses have the financial resources to resume operations following a mechanical or equipment failure. 

Step inside any commercial property, from manufacturing plants to co-working office spaces, and you’ll encounter various devices, equipment, and machinery. Technology powers everything from escalators, security systems, and heating and air conditioning systems to check-in kiosks, computers, and payment processors. Things are vital for business operations and are vulnerable to malfunction or failure, frequently at inconvenient times. 

Equipment breakdown insurance assists firms in promptly resuming operations after a piece of equipment breaks owing to a variety of frequent causes: 

#1. Mechanical Breakdowns: 

Mechanical equipment components, such as a manufacturing machine’s engine or a lift’s gearbox, can fail unexpectedly. If this occurs, equipment breakdown insurance will cover the cost of repairing or replacing parts, allowing the manufacturing process to resume with as little downtime as possible. 

#2. Electrical Malfunctions or Failures: 

Short circuits, overheating, or insulation breakdowns can all result in electrical malfunctions or failures. Equipment breakdown insurance protects against expenditures stemming from electrical accidents, whether the problem is in a building’s electrical cabling or the control panels of a production line. 

#3. Power Surges: 

Power surges from the electrical grid or internal electrical systems can wreak havoc on electronics and other equipment, such as cash registers, computer systems, and refrigeration units. These unforeseen voltage spikes cause damage; equipment breakdown coverage pays for repairs or replacements.

#4. Operator Error: 

Human error is an unavoidable component of every operation, and it can occasionally result in equipment damage.

Equipment breakdown coverage provides a solution when a machine is overworked or a mistake is made during maintenance. 

Essential Tip: Commercial property insurance protects your owned or rented structure, tools, and equipment from external property damage. This includes fire, storms, and burglary. Equipment breakdown insurance is not the same. It protects the business's equipment if it fails due to internal problems. This could be due to a component failure or user error.

Equipment Breakdown Coverage Cost 

Overall, equipment breakdown insurance costs and premiums can vary significantly depending on industry, business size, and other criteria. Your premium cost and schedule may also vary based on the conditions you agree to with your provider. However, given its protection, equipment breakdown insurance is a rather affordable form of commercial insurance.

Equipment breakdown insurance costs between $25 and $50 per year for each $50,000 of coverage. So, a typical business with $1 million in equipment would spend between $500 and $1,000 per year, or about $50 and $100 each month.

Who Needs Equipment Breakdown Coverage?

Any company that relies heavily on covered equipment to run its operations should look into equipment breakdown insurance. If faulty equipment could be disastrous for your company, the benefit of equipment breakdown coverage may outweigh the expense of a premium. Below are some instances of businesses that frequently obtain equipment breakdown insurance.

#1. Manufacturing Plants

Manufacturing plants are undoubtedly the most apparent form of business that requires equipment breakdown coverage. Many vast pieces of equipment are essential to the day-to-day operations of a manufacturing plant, and the failure of a costly piece of equipment without coverage could be disastrous. 

Policyholders should differentiate between equipment breakdown insurance and tools and equipment insurance to ensure proper coverage. Both types of coverage may be required to protect your organisation if you have a variety of machinery.

#2. Construction Companies

Another business industry where both equipment breakdown coverage and tools and equipment coverage may be beneficial is construction. However, on-site generators, computers and phones at the company’s main office may be considered large construction equipment covered by equipment breakdown.

Furthermore, construction equipment breakdown coverage protects businesses when critical systems, such as HVAC and electrical systems, fail during a construction project and cause a disruption. This sort of insurance will safeguard the construction company if a project is delayed, resulting in a loss of income.

#3. Building Owners and Landlords

Equipment failure may render a space you own unusable for an extended period. Equipment breakdown coverage would cover your income loss while you could not lease the space. This could include systems necessary to meet safety requirements, such as a fire alarm system or HVAC and electrical equipment. In the meantime, coverage is available for property damage due to equipment failure, such as pipes freezing when a heat pump fails.

What Does Equipment Breakdown Coverage Cover? 

Equipment breakdown insurance covers damages caused by internal forces like power surges, electrical shorts, mechanical breakdowns, motor burnout, or operator error. 

Note: Bear in mind that equipment breakdown insurance covers computers, not software.

What Is Equipment Breakdown Protection? 

If your home’s appliances or systems malfunction, you may add a protection called “equipment breakdown coverage” to your homeowner’s insurance policy to cover the cost of repairs or replacement.

What Does Equipment Breakdown Coverage Not Cover? 

Equipment breakdown coverage does not pay for damage due to regular use or lack of maintenance. Each insurance company has its own list of acceptable devices. Home comfort systems like central air conditioners and heaters may be eligible for coverage under this policy.

What Is the Deductible for Equipment Breakdown Protection Coverage? 

Typical equipment breakdown coverage plans include $100,000 in coverage and a $500 deductible in addition to your insurance deductible.


Does Equipment Breakdown Cover Hvac? 

Including equipment breakdown coverage in your homeowners’ insurance is a good idea. In the event of a mechanical or electrical breakdown, it provides additional safety for popular household appliances, furnaces, and HVAC systems. It also contributes to the expense of repairing or replacing damaged items.

What Is Considered a Mechanical or Electrical Breakdown? 

If a mechanical or electrical system fails, any part or accessory, like an engine or gearbox, stops working or fails to function. This also includes any mechanical, electrical, electronic, or alarm system and any damage their failure causes to other system parts.

Why Is Equipment Breakdown Insurance Needed? 

If something explodes, a portion of the ceiling collapses on your equipment, a machine fails, or your premises flood, damaging the equipment, having equipment breakdown insurance allows you to get your operations back up and running as soon as possible.

Related: EQUIPMENT INSURANCE: What Is It & What Does It Cover?

How Do You Handle Equipment Breakdown? 

The following are the five fundamental procedures for debugging equipment breakdowns:

  • Confirm that a problem exists. The troubleshooting method begins with identifying symptoms.
  • Determine the root cause of the problem.
  • Identifying and correcting the source of the problem
  • Check to see whether the problem has been resolved. 
  • By following up, you can avoid future issues.

Does Equipment Breakdown Cover Spoilage?

Equipment breakdown insurance, also known as boiler and machinery insurance or mechanical breakdown insurance, aids in covering the cost of repairing or replacing damaged equipment, including the cost of time and labor. Money not made and damaged stock.

Wrapping up

As a business owner, you know how crucial it is to safeguard your establishment against the unexpected. Accidents, including trips and falls, bad weather, and broken machinery, are common occurrences. Despite your best efforts, misfortune might still strike your company. And when they do, you should be ready for them. 

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