What is equipment breakdown insurance?

One of the core coverages in a businessowners policy (BOP), equipment breakdown insurance protects your company’s mechanical, electrical and computer equipment from unexpected breakdowns.

What equipment breakdown insurance covers

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 coverage examples

Equipment breakdown insurance is smart to have – even if you don’t own your own building, and especially if the success of your business is dependent upon properly-functioning equipment owned and operated by a key supplier, such as a local power company.

For example, if you own a pizza shop that depends on online orders, as well as walk-in customers, your business will suffer if the power goes out due to a power surge. A power outage could result in loss of heat or air, the inability to process online orders, as well as the inability to prepare, cook, serve and sell food. And if the power is out long enough, your food inventory could spoil.

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

• Business income you lost while the power was out
• 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 labor to repair and replace your damaged equipment
• The cost to replace any spoiled food

Doesn’t my commercial property insurance cover equipment?

Your commercial property insurance covers damages caused by covered external cause, such as a fire. Equipment breakdown insurance covers damages caused by covered internal forces, such as power surges, electrical shorts, mechanical breakdowns, motor burnout or operator error.

Keep in mind that even though equipment breakdown insurance covers computers, it does not cover software. To fully protect your computer systems, including software, you’ll need cyber liability insurance.