Equipment breakdown insurance
Many businesses and contractors rely on equipment or machinery to run their operations. If that equipment suddenly breaks down or malfunctions, you lose time and money. Moreover, it can hurt customer relationships due to project delays or missed deadlines. Your equipment is essential, so make sure it’s protected—just like other essential aspects of your business.
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What is equipment breakdown insurance?
Equipment breakdown insurance can help you recover from a loss related to a mechanical or electrical breakdown of your equipment or machinery, such as electrical shorts, power surges, and equipment malfunctions. It also covers rental reimbursement if you need to rent equipment while yours is being repaired or replaced. It’s typically purchased as an add-on to an existing policy.
In the past, this type of coverage was often referred to as ‘boiler insurance,’ but today’s equipment breakdown insurance is much more comprehensive and can include things from HVAC equipment to production machinery. However, it only covers sudden, accidental breakdowns—not equipment that hasn’t been properly maintained or is experiencing regular wear-and-tear.
How is equipment breakdown insurance different from commercial property insurance?
While commercial property insurance covers ‘external’ risks, such as fires, storms, and theft, equipment breakdown insurance is more specialized, and focuses on ‘internal’ risks. These include breakdown or malfunction of electrical, mechanical, and pressure equipment — risks typically excluded from commercial property policies.
What about extended warranties?
If you rely on extended warranties for your equipment, be sure to read the fine print. They often only cover specific parts or components, and do not cover operator errors. Additionally, if a breakdown occurs after the warranty expires, you’re left without any protection.
Do I need equipment breakdown insurance?
If your business—and your bottom line—is heavily dependent on specialized equipment or machinery to get the job done, then it’s important to take extra steps to protect that equipment or machinery.
For example, a breakdown of your mechanical equipment, such as motors, engines, or generators, on a construction site or manufacturing plant can bring operations to a halt. Not only do you have to pay to repair or replace that equipment, but you’ll also suffer from lost production time.
Some of the consequences of operating without equipment breakdown insurance may include the following:
- If your equipment breaks down, your company will have to cover the costs of repairs and replacements—plus any associated costs due to lost production time.
- If specific equipment breaks down, such as a refrigeration system, it could damage or spoil inventory. So, not only do you have to pay to repair or replace the equipment, but you’ll have to replace your inventory.
- Lost production time isn’t just costly. Project delays, missed deadlines, and late deliveries can strain customer relationships and damage your reputation.
- Some provinces require inspections of certain pieces of equipment to ensure compliance. If you experience a loss and need to wait for an inspection, it could take longer to get your business back up and running.
Who should consider equipment breakdown insurance?
Equipment breakdown insurance isn’t just for construction and manufacturing companies. Any business that relies on equipment, from farms and warehouses to auto shops and commercial or residential contractors, can benefit. If a breakdown of an equipment, such as excavators, bulldozers, farm equipment, or production machinery, would disrupt your income, then consider equipment breakdown insurance.
What does equipment breakdown insurance help cover?
Equipment breakdown coverage can help cover the costs of repairing or replacing damaged equipment or machinery that’s essential to your business operations, as well as associated business interruption costs. The right coverage could also help to cover additional expenses that are incurred while waiting for equipment to be repaired or replaced, such as rentals, rush repairs, or spoiled inventory.
It’s important to note that while this coverage is broad, certain types of equipment, such as production machinery, are not automatically included. If your business relies on manufacturing equipment or machinery used in production processes, you’ll need to specifically request this as part of your property coverage. A complete assessment of the production process and equipment specifications will be required. Additionally, coverage for production machinery will also come with its own deductible, which may vary depending on the equipment’s value, age, rarity, and how easily it can be repaired or replaced.
Can you prevent claims from happening entirely?
While insurance is crucial to protect your business, nothing can eliminate risks altogether. But you can work to mitigate them, and we can help you! This is where the Federated Insurance Risk Services programs come in.
We’ve developed exclusive programs and services to help you enhance workplace and employee safety—a must in any business. Our Risk Services Specialists are available to help you create, implement, and maintain a company safety program and provide you and your employees with valuable safety advice.
When you need help quickly, our Risk Management Assist* service grants you access to our Risk Services Specialists, who can answer a variety of questions on topics including property, auto, and liability loss prevention. They can also provide guidance on any regulatory, legislation, or code requirements your business may be dealing with.
Other types of insurance coverage to consider
Commercial property insurance:
Commercial property insurance can help protect physical assets, like your office and your warehouse, from external risks such as fire, floods, storms, theft, or vandalism. It can help with repair or replacement costs for tools, equipment, inventory, electronics, and other assets that are crucial to running your business.
Business interruption insurance:
Business interruption insurance is designed to help you recover lost business income and cover ongoing business expenses if your business is temporarily closed for repairs due to a covered loss. It also includes coverage for extra expenses to expedite your return to business or help limit your loss.
Cyber insurance
Cyber insurance helps support your business if devices or documents are lost or stolen, or if computer networks are breached. These incidents can lead to stolen or ransomed data, disrupted business operations, and corrupted computer systems. Cyber risk insurance also covers loss of business income due to an interruption in services caused by a breach.
Pollution liability insurance
Most general liability policies either exclude or offer very limited pollution liability coverage. However, you can help protect your business from environmental exposures with a pollution liability insurance policy. If a business stores fuel on their premises and it leaks from a tank, this coverage can help with the costs of third-party environmental damage or damage to their own property.
