Equipment breakdown insurance / boiler and machinery insurance

Equipment breakdown insurance is a type of property insurance that can help businesses recover financial losses resulting from property damage, business interruption, and spoilage.

There are 3 common situations that would fall under your equipment breakdown coverage:

Mechanical breakdown — to qualify, it must happen suddenly and accidentally

For example: A restaurant’s refrigerator breaks down and its food spoils.

Artificially generated current — such as electrical arcing

For example: An office building has a power outage and when the power comes back on, lack of proper surge protection causes an expensive scanner to stop working.

Boiler explosion — less common in current manufacturing plants

For example: A thermostat malfunctions causing a hot water tank to explode.

Because those coverages are not included in a typical commercial property insurance policy.

If you own a building, your property insurance covers you for fire, flooding, lightning, earthquake, and more. But you’re not covered for equipment breakdown — in other words, mechanical or artificially generated current-related accidents. A boiler and machinery insurance policy puts those exclusions back into your coverage. 

There’s another bonus to adding a boiler and machinery insurance policy: Government agencies require companies to have their boilers and pressure vessels inspected every few years, and inspections conducted by equipment breakdown insurance brokers and companies can satisfy those government requirements.

Yes, the two terms can be used interchangeably.

Nope, you won’t find any insurance policy anywhere that covers wear and tear.

• Steam boilers
• Hot water tanks
• Pressure vessels
• Refrigeration & air conditioning systems
• Motors 
• Generators
• Compressors
• Pumps
• Engines
• Fans
• Blowers
• Gear sets
• Turbines
• Transformers
• Electrical switchgears
• Electronic equipment
• Most production & processing equipment

A commercial air conditioning unit breaks down suddenly and accidentally.

We’re not talking about your run-of-the-mill home AC unit. We mean the big units you often see on the roof of commercial buildings. The maintenance or replacement costs for those would run pretty steep, especially if the job requires big equipment like a crane.

A restaurant’s refrigerator breaks down resulting in food spoilage.

This applies to food distributors as well, especially those handling seafood that has to stay at a certain temperature or frozen. Equipment breakdown is an important piece of insurance for these businesses.

A manufacturer that has one large machine of its kind that is essential to its entire process.

If that machine breaks down and can’t run for two weeks, the business is essentially shut down for that period. Equipment breakdown would reimburse the company’s income lost as a result of the machine not being in use.

All the coverages that come standard on a commercial property insurance policy are absent from equipment breakdown insurance:

• Fire
• Smoke 
• Water
• Wind
• Earthquake
• Wear and tear — actually, you won’t find any policy anywhere that insures wear and tear.

Restaurants and food distributors should get boiler and machinery insurance to cover food spoilage. If a refrigerator breaks down causing large amounts of product to go bad, this policy can recoup the financial losses.