What Is Equipment Breakdown Coverage?

While there are numerous types of coverage present in a BOP (business owners policy), one of the most important ones happens to be equipment breakdown insurance. This type of insurance acts as a safety net by protecting you against the mechanical failures that can occur during day-to-day business operations.

Let’s discuss the many items covered specifically, as well as the many benefits of purchasing this coverage.

What Is Equipment Breakdown Coverage?

Most of the equipment companies use these days is very expensive and they can be very costly to repair or replace. Unexpected damages and breakdowns can happen at any time and possibly halt an organization’s operations for an extended period of time.

Therefore, business owners must make sure they have equipment breakdown coverage to avoid costly damages or lost income.

What Does It Cover?

Also referred to as boiler and machinery insurance, here are the items typically covered by equipment breakdown insurance:

  • Any damaged or spoiled inventory (food items, pharmaceuticals, etc.)
  • Lost income¬†
  • The cost of replacing or repairing damaged machinery and other equipment (labor and time are included in this as well)
  • Employee lost wages
  • Any other miscellaneous repairs as a result of the equipment breakdown

Now, let’s discuss the five main items typically covered by equipment breakdown insurance:

  • Pressure equipment and boilers
  • Refrigeration systems and air conditioning units
  • Mechanical items like water pumps, elevators, generators, engines, motors, and equipment used during the production and manufacturing stage
  • Computers and other communication systems, such as fire alarms, security systems, voicemail systems, and phone systems
  • Electrical items such as the cables, electrical panels, and transformers

The Benefits of Equipment Breakdown Coverage

Many professionals suggest business owners get equipment breakdown coverage, even if they don’t operate out of a building. They especially encourage this coverage to companies whose business greatly relies on the proper functioning of their equipment.

For instance, if someone runs a bakery and relies heavily on online orders then their business could be halted in the event of a power surge. Issues like these often result in a variety of losses like the inability to receive online orders or spoiled goods.

In situations like this, equipment breakdown coverage could help you pay for the following:

  • The cost to replace spoiled food items
  • Lost income for the period of time the power was out
  • The cost to repair or replace any equipment damaged during the power surge

Summing Up

Many people believe that merely having commercial property insurance would be enough but that’s not the case since that insurance typically only covers the building itself. On the other hand, equipment breakdown coverage helps protect your equipment against damages resulting from electrical shorts, power surges, motor burnout, mechanical breakdowns, operator errors, etc.