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 your cooling system is on the fritz or your 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 equipment breakdown coverage.

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

What is equipment breakdown coverage?

In a nutshell, equipment breakdown coverage financially protects you from the direct loss of or damage to covered mechanical or electrical machinery caused by a mechanical breakdown or electrical failure. It includes the cost of repairing your equipment, including time and labor. If the equipment cannot be repaired, equipment breakdown coverage will recoup the cost of replacing the equipment.

Equipment breakdown insurance also covers inventory that is spoiled as a result of the breakdown. For example, if you own a restaurant and a power surge causes your refrigerator to malfunction, equipment breakdown restaurant insurance may cover the cost of repair and would also compensate you for the food that was spoiled.

How do you add equipment breakdown coverage to an insurance policy?

Most insurance companies treat equipment breakdown insurance as an additional coverage area, or add-on, to commercial property insurance. With Thimble, for example, equipment breakdown coverage is an optional endorsement to our business owners’ policy (BOP).

That’s because we like to keep things simple and convenient. So when you purchase a BOP from us, you can add equipment breakdown coverage to your policy. Because it’s part of a package policy, you’ll also be covered for lost business income. Why is that important?

Referring to the example above, if you own a restaurant and your refrigerator breaks down, resulting in the spoilage of the seafood intended to be featured in tonight’s chef’s special, your regular patrons may tut-tut about not being able to have their favorite tartare. In fact, you may have to close down for the evening to clean up the mess and remove the odor.

If you have BOP insurance with an equipment breakdown endorsement, not only will you be covered for the equipment repair and the cost of replacing a fridge full of tuna steaks, you may be covered for the lost income as a result of shutting down for a few days.

In addition to business income insurance, Thimble’s BOP insurance also includes general liability insurance, commercial property insurance, and business personal property insurance.

How is equipment breakdown 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 insurance covers three main types of equipment damage:

  • Electrical Apparatus — Includes electrical, magnetic, or electromagnetic energy that damages, disturbs, disrupts, or otherwise interferes with any electrical or electronic wire, device, appliance, system, or network.
  • Steam Apparatus — Includes explosion of steam boilers, steam pipes, steam engines, or steam turbines owned or leased by you, or operated under your control.
  • Mechanical Apparatus — Mechanical breakdown, including rupture or bursting caused by centrifugal force.

So, for example, if your bakery’s mixer gets stuck on high speed due to an untimely mechanical failure, you may be covered for the cost of repair or replacement — if you have equipment breakdown coverage.

What does equipment breakdown insurance cover?

Equipment breakdown insurance protects businesses from several consequences of equipment damage and failure, including:

Loss of perishable goods — Should the refrigerator in your food catering business shut off because of a motor failure, that could result in all of the food purchased for your next big event spoiling.

Loss of expected business income – Should a backhoe fail, it could prevent you from being able to complete your next professional landscaping project, 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 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 to help you fix the damages so you can get your business back up and running again.

When does equipment breakdown coverage kick in?

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

Equipment breakdown coverage could also cover utility company-owned equipment. This may include equipment mentioned above, the difference being that 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.

What is not covered by equipment breakdown coverage?

You might be wondering whether equipment breakdown coverage would cover equipment failures due to normal wear and tear. It does not. For equipment breakdown insurance to apply, the malfunction must be due to sudden and accidental mechanical or electrical breakdown, and not due to normal wear and tear or a failure to maintain the equipment per the manufacturers’ specifications.1

Also, although electrical surges caused by lightning may be covered, artificial electrical surges that damage your equipment probably aren’t covered. So, if you have a DJ business , and a nearby lightning strike sends a surge that suddenly fries your high-end speakers, you may not make it through the newlyweds’ entire playlist, but at least your tweeters and woofers will be covered.

If, on the other hand, a crazy uncle is doing his unique version of a moonwalk that ends with him spilling a drink on your controller, that probably isn’t covered — at least not by your equipment breakdown coverage.

Each insurance company will have its own set of exclusions, so make sure to read your policy carefully, so you know what’s covered and what’s not.

Don’t have a breakdown, get equipment breakdown insurance

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 to protect your small business. Our business owners’ policy (BOP) provides multiple coverages, including general liability insurance, commercial property, business property, and even offers equipment breakdown coverage as an optional add-on.

Getting insured with Thimble only takes a few minutes. Apply for a BOP on the app, click “get a quote” on our app or site and we’ll personally take you through the rest of the process right away. How’s that for simple?


  1. Big i Independent Agent. Equipment Breakdown: Accidental Damage or Wear and Tear?