Equipment breakdown coverage is designed to protect various types of equipment, including:

• Computers and telephone equipment
• Mechanical system components
• Manufacturing equipment
• Refrigeration devices
• Heating and ventilation systems
• Elevators and escalators
• Security systems
• Retail point-of-sale devices

This coverage doesn’t require that the equipment breakdown resulted from a covered event in a property insurance policy, such as a fire. Coverage can kick in after an equipment malfunction.

Also known as boiler and machinery insurance, or mechanical breakdown insurance, equipment breakdown insurance helps cover:

• The cost to repair or replace damaged equipment, including time and labor
• Lost income
• Spoiled inventory
• Necessary expenses incurred during the restoration period

There are five categories of equipment that equipment breakdown insurance typically covers:

1. Mechanical, which includes motors, engines, generators, elevators, water pumps and specialized production and manufacturing equipment.
2. Electrical, which includes transformers, electrical panels and cables.
3. Computers and communications, which includes computer systems, phone systems, voice mail systems, security systems and fire alarm systems.
4. Air conditioners and refrigeration systems
5. Boilers and pressure equipment

Equipment breakdown insurance typically excludes the following:

• Wear-and-Tear: Machines and equipment have an expected life span and any breakdown due to age or use is not covered
• Normal Maintenance: Business owners are expected to maintain normal maintenance and routine care for machines and equipment
• Leakage: Equipment leakage results from overcurrent trips with an unintentional electrical connection and can cause power surges
• Mobile Equipment: Forklifts, tractors, bulldozers, and other mobile machines are excluded even if they’re used for daily business operations
• Vehicles, Aircraft, and Floating Vessels: Any and all commercial vehicles, aircraft, and boats used for business purposes are also excluded from equipment breakdown insurance
• Domestic Water and Sewer Piping: All pipe systems used for source plumbing and drainage to sewers aren’t covered by equipment breakdown policies

While it is hard to imagine a company not reliant on computers or other equipment, service providers such as plumbers or a dog walker may not have equipment that’s critical to their operations. Review options with your insurance carrier to obtain the right coverage for your business needs.

A resounding yes, of course! That is unless you are still operating your business like how your great grandfather used to run his business!

Many business owners has the misconception that their business risk is fully covered by purchasing a commercial property insurance, add in a cyber insurance policy to cover online malicious attacks from external threats, or even throw in a business interruption insurance policy in case the shop is damaged by fire or flood. Your commercial property insurance covers damages caused by covered external cause, such as a fire, but a Machinery and Equipment Breakdown Insurance covers damages caused by covered internal forces, such as power surges, electrical shorts, mechanical breakdowns, motor burnout or operator error..

Take for example, if you are operating a restaurant that serves walk-in & online orders, your business will suffer if electrical power is cut off due to a power surge. Loss of electricity would mean that you cannot process online orders, and the restaurant would not be able to prepare, cook, serve and sell food. Prolong power cut off can also cause food wastage due to spoilage.

In this example, equipment breakdown insurance may help pay for:

• Business income you lost while the power was out (if you are not already covered under business interruption insurance)
• The cost to repair your walk-in refrigerator and to replace a computer that were damaged by a power surge that occurred when the electricity was restored
• Costs associated with the time and labour to repair and replace your damaged equipment
• The cost to replace food inventories that has been spoilt due to power cut off

Equipment breakdown coverage is a necessity for any business that relies on machines or equipment in the course of its daily work. It is critical not just to repair the equipment but to provide replacement income for the duration of time machines didn’t work. It is also a valuable component of any business interruption insurance plan.

Here are common examples of who needs equipment breakdown coverage:

• A manufacturer uses equipment to produce products.
• A small print shop needs copiers to work.
• A restaurant needs the refrigerators to remain fully functional.
• An IT company relies on servers and computers.
• A mechanic requires hydraulic lift to work on cars.