Equipment Breakdown Insurance

Why do I need Equipment Breakdown Insurance?

There are three main reasons why Equipment Breakdown Insurance is important:

1. It can save you money by covering additional costs incurred as a result of loss or damage caused by mechanical breakdown, electrical arcing and explosions of pressure vessels, all of which are usually excluded in a Commercial General Policy (which can be an unpleasant surprise to business owners facing a claim). Equipment Breakdown coverage must be added to your existing Commercial Property policy or you may purchase it on a stand alone basis.
2. Equipment Breakdown coverage usually includes the added value of risk management support offered by your broker or insurance company, which may help prevent damage to your insured equipment.
3. Several provinces require the inspection of boilers and pressure vessels; an insurance company inspection would satisfy these requirements.

What is Equipment Breakdown Insurance?

Equipment Breakdown insurance addresses different risks than a commercial property policy. Typically, these policies cover external risks like, fires, storms, theft, and vandalism. Adding Equipment Breakdown coverage to your policy helps protect your business from costs incurred due to internal risks, like the sudden and accidental breakdown of electrical, mechanical and pressure equipment that keeps a business operational.

Some equipment that may be covered, includes:

• Boilers and hot water tanks
• Refrigeration and air conditioning systems
• Air handling units
• Elevators
• Transformers
• Electrical distribution equipment (circuit breakers, electrical panels)
• Pressure vessels
• Motors
• Generators
• Turbines
• Transformers
• Production and processing equipment

What does Equipment Breakdown Insurance cover?

Equipment Breakdown Insurance can be purchased to cover the repair and replacement of the equipment required to run your business. It can also cover associated business interruption costs and additional expenses incurred while keeping your business operational during the time it takes for the damaged equipment to be repaired or replaced.

It may also help cover the cost of the following:

• Damaged equipment
• Temporary or rush repairs
• Property damage liability costs if equipment malfunctions and damages someone else’s property
• Mandatory inspections of key equipment
• Spoiled inventory
• The equipment restoration period

To understand the details of your Equipment Breakdown Insurance, contact your broker. They’re available to answer your questions and ensure you have coverage tailored to the needs of your business.

Incidents covered by Equipment Breakdown Insurance

Equipment Breakdown Insurance covers a broad range of incidents across many industries. A few of the more likely Equipment Breakdown coverage examples are highlighted below.

Power surges

Power surges can be caused by a power outage or blackout, electrical overload, lightening strikes, or faulty wiring. A power surge can damage appliances, circuit boards, and electronic devices (i.e., computers and hard drives), resulting in lost business data, reduced employee productivity and customer service challenges.

Mechanical

From construction sites to manufacturing plants, mechanical equipment breakdown can greatly impact your company’s bottom line, due to the cost to repair and replace the equipment and the lost production time. Mechanical equipment can include motors, engines, elevators, generators, and specialized pump and manufacturing equipment.

Electrical systems

Damage to electrical systems can shut down almost any business. Electrical switchgear and cable structures are interconnected; should electrical arcing (or short circuits) occur in one area, it can spread and damage large sections of the system. Arcing can melt steel and destroy cable insulation, causing damage to the electrical system and interrupting service.

Computers and communications

Many businesses rely heavily on computer and communications systems to keep them connected with staff, vendors and customers. Examples of items that may be covered include voice mail systems, computer and phone systems, fire alarm systems, and security systems.

Pro tip:

While Equipment Breakdown Insurance could cover computers and electronics, it may not cover software and data. Learn more about cyber insurance.

Air conditioners

Commercial air conditioning systems contain a variety of components that can break down and result in costly repairs or replacement. The compressor alone could cost upwards of $15,000. Lack of air conditioning can force building owners to rent temporary equipment or relocate residents to other accommodations.

Refrigeration systems

Some businesses, like restaurants, require refrigerated and freezer storage to maintain food quality and perform other functions. Breakdowns are usually a result of an electrical breakdown of motors, or mechanical parts breaking in the compressor, resulting in business interruption and a loss of perishable goods.

Boilers and pressure equipment

Boilers are often susceptible to breakdown due to low water cut-off mechanism failure. Other typical failures include explosion, burning, bulging, and cracking.

Equipment breakdown can cost more than just the price of repairing or replacing the equipment; it may also cause damage to your facility and result in lost production time. Talk to your insurance advisor about the various risks that could impact your business and how Equipment Breakdown Insurance can help.

What is not covered by Equipment Breakdown Insurance?

Equipment Breakdown Insurance usually does not cover equipment that:

• Is poorly maintained
• Experiences regular wear and tear
• Old equipment that needs to be replaced

Pro tip:

Be proactive! Conduct regular maintenance on your equipment to ensure it lasts as long as possible, reducing the risk of unnecessary breakdowns that result in unnecessary costs.

Your Equipment Breakdown Insurance may have a policy limit, which means you may be responsible for paying out of pocket for costs that exceed the limit. Talk to your broker to find out more about Equipment Breakdown Insurance coverage limits.

Get in touch with the experienced insurance brokers from BrokerLink

Equipment breakdowns are usually unexpected and can result in significant production and service delays, impacting your bottom line. Equipment Breakdown Insurance is an important coverage that can help your business stay afloat while repairs occur.

At BrokerLink, our insurance and risk management advisors are here to help you work through the possible scenarios and ensure you have the Equipment Breakdown coverage tailored for your unique business needs. Call us, we’re here for you:

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Equipment Breakdown Insurance FAQs

Does my commercial property insurance cover equipment?

Most commercial property insurance policies only cover losses from external forces, like fire or vandalism. Equipment Breakdown coverage is purchased as an add on, and can help your business cover the costs of losses due to internal forces that cause a breakdown or malfunction, like power surges or motor burnouts. Talk to a insurance advisor to learn more about how Equipment Breakdown Insurance can help your business should the unexpected happen.

Is Equipment Breakdown Insurance the same as Boiler and Machinery Insurance?

Equipment Breakdown Insurance was once called Boiler and Machinery Insurance. Many thought that if they didn’t have boiler or machinery risk, they didn’t need coverage, which is why Equipment Breakdown Insurance is commonly misunderstood. Over the years, the coverage evolved and expanded to include other types of equipment and machinery, which led to a change in the name.

How do you get Equipment Breakdown Insurance?

Equipment Breakdown Insurance is important coverage for almost any business and it is available as an add on to your policy. Talk to your expert insurance advisor to learn more about Equipment Breakdown Insurance and how to add it to your policy.

If you have any questions, contact one of our local branches.