Because the very nature of business equipment is changing – becoming less mechanical and more computerized – equipment breakdown insurance is more important than ever. Computerized equipment or machines controlled by microprocessors are extremely sensitive to power surges and electrical fluctuations, both of which are leading causes of equipment failure in the U.S.
In addition, reliance on the Internet and real-time web transactions requires more complex and expensive computer and inventory systems. Often, company records, inventory and databases are stored in digital formats that are almost impossible to access when equipment is not functioning, causing delays and loss of income.
What does equipment breakdown insurance cover?
Also known as “boiler and machinery” insurance, equipment breakdown coverage protects against breakdowns caused by power surges, mechanical breakdown, motor burnout, boiler damage and operator error.
It can pay for:
- The cost to repair or replace the damaged equipment
- Costs associated with the time and labor to repair or replace the equipment
- Business income losses when a covered breakdown causes a partial or total business interruption
- Other expenses incurred to limit loss or speed restoration
- The cost to replace spoiled stock or materials
What if you don’t own your building?
Even if you lease your building or use equipment that belongs to others, you still need equipment breakdown insurance.
What if an equipment problem offsite impacts your business?
Sometimes, equipment breakdowns at other locations can cause significant losses to your business.
For example, if you run a small business and depend on your website for orders, chances are that an independent Internet service provider hosts your site at another location. What happens if that location loses power or experiences damage to its equipment, causing an interruption of your web presence resulting in a loss of orders? Equipment breakdown coverage helps pay for lost business income when a key supplier’s equipment breaks down.
Will your property insurance or warranties cover damage to equipment?
Most standard property insurance policies do not provide insurance for equipment breakdown, and warranties cover only so much.
Warranties are restrictive, and typically cover new equipment for a determined length of time, and for specific types of product failures. Also, warranties don't pay for lost business income or equipment damage due to operator error, the cause of many equipment breakdowns.
How much should you buy?
When determining the amounts and limits of coverage, it’s important to look beyond the face value of the equipment being insured and consider all the situations that could occur.
What if damage occurs to other property as a result of an equipment breakdown? What if parts for the damaged equipment are not readily available? What if you are closed for an extended period of time? You can imagine how equipment breakdown losses could really add up.