Virtually every small business relies on mechanical equipment every day. From the boiler that supplies heat to your office to the computers you use to process orders, your equipment keeps your business running smoothly in many different ways. Conversely, when equipment breaks down, it can bring your operations to a screeching halt. That’s why equipment breakdown insurance is a must-have.
What Is Equipment Breakdown Insurance?
Also known as “boiler and machinery” insurance, equipment breakdown insurance covers losses associated with many different kinds of mechanical breakdowns. For example, it will pay to replace or repair equipment damaged by a power surge, a boiler malfunction, a burned out motor, or even an accidental error by an employee. It also covers business income lost when a mechanical breakdown forces your business to shut down. In most cases, it will also pay to replace spoiled inventory or materials.
Some examples of the types of equipment covered include:
- Mechanical equipment
- Electrical equipment
- Heating and air-conditioning systems
- Refrigeration systems
- Boilers and pressure systems
- Computers and technology
What’s more, you don’t need to be the owner of the property for equipment breakdown insurance to kick in. Say, for example, you lease the property where you run a year-round nursery business. In the dead of winter, an electrical circuit shorts out, shutting down power to the system that maintains heat and humidity in your hothouse. Eighty percent of your tropical plants die. And your business can’t reopen until the heat is fixed and you replace the plants you lost.
In this case, even though you don’t own the building and aren’t responsible for paying for the repairs, equipment breakdown insurance would cover your lost inventory. It will usually cover a portion of your lost income as well.
Equipment breakdown insurance generally covers only “accidents.” According to the International Risk Management Institute, this means that breakdowns caused by known or hidden defects, normal wear-and-tear, or deferred maintenance will typically be excluded from your coverage. Examples of specific exclusions may include:
- Rust, corrosion, settling or deterioration
- Any condition that develops gradually over time
- A programming error
- Miscalibration or misalignment during routine maintenance
Additionally, equipment breakdown insurance will not cover perils such as fires, windstorms, explosions (other than pressurized boilers) or other events covered by your property insurance policy.
Supply Chain Issues
Equipment breakdown insurance can also protect you against disruptions in your supply chain. Say, for example, you own a small restaurant. Your main meat supplier has a breakdown in its refrigeration system, and a significant amount of the meat it would normally ship to your restaurant spoils. As a result, you can’t serve the most popular items on your menu for a week. You lose business income and, perhaps, some customers too.
Once again, the cost of repairing the equipment that caused the disruption in your supply chain is not your responsibility. However, a mechanical breakdown still caused you to suffer a loss. Thus, your mechanical breakdown insurance should pick up the tab.
How Much Equipment Breakdown Insurance Do You Need?
Before buying equipment breakdown insurance, it’s important to think about all of the possible scenarios that may come up. For example, steam from an overheated boiler can damage furniture, office equipment, computers and much more. Or a power surge could blow out your entire in-house computer network. How much would those items cost to replace?
At the Carmoon Group, we’re business insurance experts with over 20 years of knowledge and expertise. Why worry about whether you have adequate coverage when we can design a comprehensive insurance program tailored to your needs? Just give us a call to schedule an appointment for your insurance review. Or fill out our online form and we’ll get back to you right away.