Equipment breakdown coverage 101

Equipment breakdown coverage covers accidental or sudden equipment malfunctions and the damage this might cause to the business. Learn more!

Equipment breakdown coverage for camera damage

Your small business relies on the tools of the trade to operate efficiently. In some form or another, nearly every business relies on hardware. When this vital equipment breaks down, it’s problematic.

Whether the A/C goes on the fritz or production equipment fails, even a small slowdown is bad for business. The good news is that you can prevent these issues from impacting your bottom line with an equipment breakdown coverage policy.

But what is equipment breakdown coverage and how does it work? Find out below.

What is equipment breakdown coverage?

In order to ensure that businesses aren’t taking advantage of the policy, insurers make it clear to insureds that property damage caused by a breakdown of covered equipment must result in a direct physical loss to the equipment. Generally, the loss will cause enough damage to require repairs or replacement.

In most cases, all of this equipment will fall under one of three types of coverage:

  1. Mechanical breakdown failure
  2. Failure of pressure or vacuum equipment
  3. Electrical failure

So, going by the definition of a breakdown, if a machine shuts down for no apparent reason, it wouldn’t count. Why? There’s no evidence of physical damage to the equipment.

How are equipment breakdowns defined?

Equipment breakdown coverage is a modern form of insurance that’s meant to replace traditional boiler and machinery insurance. These days, few businesses rely upon steam boilers for their industrial power; they do, however, depend upon electricity to make their business engine run.

Equipment breakdown coverage was created to protect the various electrical systems, computers, and production machines that help your business operate at peak capacity. It covers accidental or sudden equipment malfunctions and the damage this might cause to the business, its equipment, or other property.This type of policy is meant to shield the following parties:

  • Your business
  • Equipment leasing companies
  • Landlords or property managers

Since most commercial property insurance policies will automatically exclude business losses caused by malfunctioning equipment (unless the issue is caused by a covered peril), equipment breakdown coverage covers those gaps.

What is covered by equipment breakdown insurance?

Equipment breakdown insurance provides businesses with several protections from equipment damage and failure, including:

Loss of perishable goods — For example, should the refrigerator in your restaurant shut off because of a motor failure, that could result in all of the food products going bad.

Medical bills – If you or a third party is hurt by an equipment breakdown, the policy would help cover the costs of medical treatment.

Loss of expected business income – For instance, should a vital piece of machinery fail, it could prevent you from being able to do your job, which would lead to lost income.

Cost of temporary or permanent repairs – If your equipment is damaged, your policy would help you cover the costs to repair or replace the important equipment.

Cost of data restoration – When computers and other key systems fail, that can lead to data loss. An equipment breakdown coverage policy could be used to help recoup the costs of recovering and restoring the lost data.

Cost of demolition, repair, and/or rebuild – The policy can be used to help repair or rebuild the wreckage caused by failed equipment.

As you might imagine, a large equipment failure could result in several different types of damage. For example, should any mechanical, vacuum, or pressure-based equipment malfunction, it could result in an explosion. A catastrophic event like this can come with serious damages, such as:

  • Property destruction
  • Equipment destruction
  • Bodily injury
  • Business operation cessation

In a case like this, your equipment breakdown coverage would act as a lifeline. You could use it to fix all the damages and get back to business.

What type of equipment is covered?

Equipment breakdown coverage was created to cover a wide range of different types of equipment, including:

Electrical and mechanical equipment – This includes a diverse selection of electrical or mechanical equipment, such as:

  • Air conditioners
  • Generators
  • Furnaces
  • Circuit breakers
  • Refrigerators
  • Production machinery
  • Elevators
  • Escalators
  • Compressors

Communication equipment and computer equipment – This applies to any office tools that are used to facilitate communication or automate office processes, including:

  • Laptops
  • Desktops
  • Tablets
  • Mobile devices
  • Telephone systems
  • Fire alarm systems
  • Security systems
  • Printers
  • Scanners
  • Fax machines
  • External hard drives
  • Physical servers

Vacuum equipment and pressure vessels – This covers high-risk equipment that works via vacuum or internal pressure, like:

  • Boilers
  • Vacuum pumps
  • Steam cookers
  • Hot water heaters
  • Pressurized storage tanks
  • Autoclaves
  • Vacuum furnaces
  • Vacuum turbo emulsifiers

Utility-owned equipment – This may include equipment mentioned above, except it is owned by a utility company, located on the business premises, and used exclusively to support your business. In most cases, this is related to the utility equipment that powers the building with electricity.

Is equipment breakdown coverage the same as boiler and machinery insurance?

Although equipment breakdown coverage is meant to replace boiler and machinery insurance, they are not the same thing. Boiler and machinery insurance is outdated, created for a different time and people—one when steam boilers were humanity’s primary power source.  

A modern office relies on various different types of technology that weren’t around when boiler and machinery insurance was created. So, they’re not covered. Because it was made for the modern day small business, equipment breakdown insurance provides protection from a much wider range of equipment failures.

Thimble: protecting your business

When it comes to your small business, simply protecting your equipment from breakdowns isn’t enough. You also need to shield your company from the liability it faces on a daily basis. But where do you go for that type of protection?

Meet Thimble–the faster, smarter, more affordable way small businesses can purchase general liability insurance. We provide easy-to-buy policies that go by the hour, day, or month. It’s insurance for businesses on the go, and who never know when their next job might be.

How does it work?

Download the Thimble mobile app and click “Get quote,” answer three quick questions, and voila! You’re covered. In less than 60 seconds, you can go from being exposed to liability to protected on the job.

Your equipment may break down. It may fail you. But you can get to work with confidence knowing that Thimble won’t, with general liability coverage for the common risks that come along with any business.

Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.

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DISCLAIMER: The information contained on this page is intended to provide general information only. For specific legal advice, please contact an attorney. For advice regarding your particular insurance needs, you should speak with your broker or agent to ensure that you have the appropriate coverages and limits.