Equipment breakdown coverage offers critical protection for business owners by addressing perils that are excluded from standard property policies including mechanical breakdown, electrical breakdown, and pressure systems breakdown. With today’s high-tech equipment often resulting in higher exposure values and the need for more specialized repairs, businesses need equipment breakdown coverage now more than ever. For the purpose of this coverage, the term “breakdown” refers to direct physical loss that causes damage to covered equipment and requires repair or replacement. It does not include damage caused by wear and tear, deterioration, or corrosion. Equipment breakdown coverage is not intended to be a maintenance policy. Equipment breakdown coverage may be applied to a wide variety of equipment in many industries. Here are a few examples. Keep in mind that a few types of equipment are not covered including self-propelled equipment
(such as vehicles), piping not directly associated with covered equipment, and tanks not under pressure. Let’s review two loss scenarios to illustrate the benefits of equipment breakdown coverage. A severe storm caused multiple power surges in the electrical systems of an office building. The tenants incurred $14,000 in property damage, and expenses related to business interruption totaled over $38,000. The property policy was endorsed with equipment breakdown coverage, which covered the losses. The businesses were up and running within three days. A severe storm caused multiple power surges in the electrical systems, which damaged the compressor. The owners of the family-owned restaurant incurred $2,800 in property damage, $2,200 in food spoilage, and another $8,000 in business interruption. The restaurant did not have equipment breakdown coverage. As a result of the losses sustained, the business could not recover and closed its doors after 12 years in operation. As you can see from these examples, equipment breakdown is an important coverage
for businesses and their owners. Next, we’ll review the benefits to insureds and agents. For insureds, equipment breakdown insurance eliminates gaps in coverage, covers more losses, and offers an inexpensive premium compared to the exposure. It can replace the need to purchase extended manufacturer’s warranties, and there are no exclusions for age of equipment, useful life, or other factors. The policy also covers jurisdictional
inspections and costs. For agents, equipment breakdown insurance reduces errors and omissions and eliminates gaps in coverage. Since this is monoline coverage, the policy allows flexibility with limits, deductibles, and coverage enhancements. Finally, equipment breakdown coverage offers agents the potential for increased income. Equipment breakdown coverage is an important protection for your clients who own commercial business operations. It covers exposures normally excluded from standard property policies exposures that could mean the end of the business in the event of a large loss. For more information contact [email protected]