Understanding The Basics of Mechanical
Breakdown Insurance

When equipment is working, we take it for granted. But when something breaks down — whether it’s a computer, a production machine, or the HVAC — things can quickly grind to a stop. But do you realize that most of the equipment you depend upon every day isn’t covered by your property insurance if it stops working?

That’s why mechanical breakdown insurance, also known as equipment breakdown insurance or “boiler and machinery” insurance, is so important to business owners. It covers your losses and helps get you up and running quickly if your equipment fails.

“Everyone who operates any kind of business using electrical or mechanical devices should buy mechanical breakdown insurance,” says Brad Bengston, Commercial Sales Agent for Nationwide Insurance. “A lot of people think it’s only for large factories, but small companies can benefit from mechanical failure coverage, too.”

The basics of mechanical breakdown insurance

Mechanical damage insurance covers five categories of equipment:

Electrical
Equipment like transformers, electrical panels and cables can arc, or short circuit, and cause equipment damage, or result in a fire or explosion.

Mechanical
This category includes specialized production and manufacturing equipment, motors, engines, generators, elevators, and water pumps. These often wear out or break down due metal fatigue, vibration, misalignment or operator error.

Computers and Communications Equipment
Computers, phone systems, voice mail systems, security and fire alarm systems can be damaged by power surges or electrical fluctuations.

Air Conditioning and Refrigeration Systems
Notorious for failing at the worst possible time, this type of equipment is usually difficult and costly to repair, and can cause real havoc to businesses.

Boilers and Pressure Equipment
Equipment like boilers and pressure vessels provide steam for heat, hot water, cooking or sterilization. Depending on your business, a lack of heat or hot water can close the doors, or worse, a malfunction in this equipment could result in an explosion.

How am I covered?

Mechanical breakdown insurance pays for repairs or replacement of damaged equipment resulting from an accident or event that’s defined in your policy. (Damage resulting from floods, for example, are not covered in this type of policy.) You don’t need to own the building in which your business is housed in order to be covered.

You are also covered if some of the equipment used by your business is leased or rented, and you have a contractual obligation to insure the equipment unless otherwise provided by the personal property coverage of others. Depending on the policy, your coverage could extend to portable equipment that is damaged when temporarily away from your business location as well as property owned by others in your care, custody or control.

Additionally, mechanical failure insurance covers the costs associated with the time and labor to repair or replace the equipment; other expenses incurred to limit the loss or speed the restoration only if it reduces the overall costs; and the expense, for example, to replace spoiled or contaminated food or other materials damaged as a result of the equipment failure.

How much should I expect to pay for mechanical damage insurance?

There are many variables that will impact your premium, which may include the type of business you’re in and where it is located.

The cost of repairing or replacing expensive equipment needs to be carefully weighed against any premium costs. Consider this also: because most equipment today uses a microprocessor, there’s an increased risk of failure due to power surges, excessive moisture, or extreme heat or cold.

Contact a Nationwide insurance advisor today and find out how our mechanical breakdown insurance policies can provide you great coverage for your company.