What Is Equipment Breakdown Coverage: Why Do I Need It?

Our homes and businesses operate on electricity and technology. These marvels have made our personal and economic lives more convenient and efficient but can experience failures. With our dependence on technology and electrical power, the costs of failure can extend beyond repair costs and momentary inconveniences. The losses can exact significant economic losses. The risks from equipment malfunctions represent the subject of Equipment Breakdown Coverage.

The Equipment

Once upon a time, what we now call equipment breakdown insurance went by the name “boiler and machinery” insurance. Such a title reflected on boilers and their many steam-powered items. 

The modern manifestation of this insurance does include boilers and pressure-based equipment. However, electricity and technology have expanded the universe of Equipment Breakdown Coverage for both business and residential customers. Seemingly countless pieces of equipment run on intricate circuits, chips wires, fibers, and cables. These systems calculate and otherwise process data at incredible, almost immeasurable speeds.

You can imagine the equipment, machines, and symptoms in your home or office that a breakdown policy may cover. Below are some of the types: For the Home Equipment breakdown insurance covers several home electronics, appliances, and systems. These include:

• Televisions
• Refrigerators
• Stoves and ovens
• Microwaves
• Dishwashers
• Exercise equipment
• Gaming consoles
• Computers
• Washers and dryers
• Heating/Air Conditioning Unit
• Thermostat
• Water heaters
• Furnaces
• Security systems

If you’re in business, you likely want to cover equipment commonly used in commercial, office, and industrial settings. These include the computer and information systems that store information on inventories, prices, work schedules, and deliveries. Many retailers use card readers and other point-of-sale methods.

When we advise business owners about breakdown insurance, we consider the specific industries in which they operate and the items that can malfunction. Here are a few examples of equipment from business sectors that can malfunction:

Restaurant - Large-scale refrigerators, freezers, beverage machines, ovens, stoves, coolers, dishwashers, and cash registers. 

Medical Practices - Imaging devices such as x-rays or sonogram machines, vital sign monitors, and the systems that store medical and billing records.

Automotive Repair - Diagnostic machines, hydraulic lifts/jacks, air compressors, lug nut removers, battery chargers

Farms/Agricultural - Irrigation systems, carbon dioxide, and oxygen monitors; wind or solar electric generators and turbines

Below, we’ll discuss the types of losses that may equipment breakdown insurance may cover.

Why Have This? Isn’t Property Insurance Enough?

You might believe that standard homeowners or property insurance policies cover damage or loss to the contents in the home or business. That belief is correct. However, it is misplaced when you consider all the ways that equipment or other property may be damaged, and homeowners do not cover all of them. 

Specifically, homeowners and business property policies address different risks than an equipment breakdown policy. Property and casualty insurance covers losses from external forces. In this group lie the following types of incidents:

• Fires
• Storms
• Lightning
• Riots
• Vandalism
• Theft
• Damage from aircraft, vehicles, falling objects
• Sudden and accidental discharges of water

The basic homeowners and business policies don’t cover damage to your belongings. These damages can occur as a result of power surges, electric arcs, spinning that bursts pipes or other mechanical breakdowns of equipment and systems.

You might not associate electrical and mechanical breakdowns as catastrophic, disastrous, or significant events. Yet, these breakdowns can inflict significant economic and other losses. For instance:

Idleness. Damaged machines can’t produce goods, generate or process orders, or answer service or other calls. In downtime periods, you are not generating revenues, and your workers are being paid to do nothing. According to an Aberdeen Research study, downtime carries a price tag for manufacturers of as much as $260,000 per hour. Machine Metrics puts the cost of idleness from equipment breakdowns at $1,040,000 per occurrence, based on an average downtime of four hours.

Lost Customers. Power failures affect many businesses that depend upon the presence of paying occupants:

• Hotels, motels, apartments, bed and breakfast establishments
• Daycares and preschools
• Nursing homes and other assisted living facilities
• Restaurants

Many of these establishments have strict regulations that require sanitary and safe conditions, and the loss of power means that the facilities cannot comply with the laws.

You might also lose customers because you can’t receive orders or respond to customer concerns and requests. Imagine an investor who wants to sell stock before it declines or buy when the price is low. A contractor against a deadline urgently needs building materials or tools for a project. When a phone system is s down, or email is not accessible, you can’t return calls. According to Machine Metrics, nearly three out of ten businesses experiencing an equipment breakdown could not service or support equipment or goods.

These circumstances yield disappointed customers and a diminished reputation for your business. 

Fire or Theft. Shorts and surges shut down systems that detect fires, carbon monoxide, or intruders. Businesses also place security cameras toward cash registers and other places where the money is kept and exchanged. According to a  study by the Association of Certified Fraud Examiners, businesses lost in 2018 on a median basis $29,000 in cash register disbursements, $75,000 in cash theft, and $50,000 from tampered checks and payments.

For the internal forces that cause equipment or mechanical breakdowns, insurers may provide separate policies or addenda (extras) to the necessary property or homeowners’ policies. We’ll explain more fully below the covered — and excluded — events.

The Meaning of “Breakdown”

Equipment breakdown coverage applies when you have a sudden, unexpected failure to a mechanical or electrical system. The best home insurance Ontario policies (and business ones) address both the outside and inside threats to your equipment. Covered events under equipment breakdown insurance include:

• Power surges, such as high voltage into the electrical system
• Electrical shorts
• Loss of vacuum or pressure
• Connections of cables or wires come loose
• Moisture or condensation that damages circuits, wires or other components
• Rupture of a pipe caused by centrifugal force, or spinning
• Operator error
• Motor failure
• Explosions of steam pipes, steam boilers, steam engines or steam turbines

Over time, the computers, machines, and other equipment you employ at home or business will lose speed and effectiveness. Outdated computers may not have the capacity to process more complex data or transactions or the memory for large video files. Wear and tear from repeated, or prolonged use or rust may reduce the torque, speed, or strength of motors or tools. Scratches or condensation on a computer or diagnostic screens might make it harder for you to read images. 

These conditions don’t qualify for breakdown coverage because your equipment still functions. It may not work as smoothly or as efficiently as in its younger days. Also, loss from wear-and-tear is not accidental or sudden.

Insurance companies would reject your equipment breakdown claim if you failed to take care of the equipment or system. Lack of regular inspections or maintenance will often signal neglect. Some insurers include in their benefits reimbursement for the cost of an inspection to induce you to catch potential problems before they turn into losses. 

The cost of repairs or replacing damaged goods comes with breakdown insurance. You have in your home or business several devices that operate effectively, such as computers or hard drives. When the processor or a circuit is fried, the device becomes useless. In these cases, the replacement benefit proves very valuable. Without equipment breakdown insurance, you face potentially several hundred or even thousands of dollars.

Without power, your freezers or cooler can’t preserve meat, poultry, milk, cheese, vegetables, and ice cream. For the household, this means potentially a hefty grocery bill to replace these perishables. For restaurants or grocery retailers, the breakdown of freezers, refrigerators, or coolers translates to perhaps thousands of dollars in lost inventory to replace and sales. 

You may have a claim for lost sales and revenues from equipment breakdowns. Lost income might come from canceled reservations, unfulfilled orders, and services that cannot be rendered. 

The rupturing of steam pipes may release steam and water onto clothes, carpets, walls, floors, and other objects. With equipment breakdown coverage, you get reimbursed for the costs associated with replacing these items. Also, you have insurance against liability you may face if the breakdown damages another’s property or causes personal injuries.

Claims under breakdown policies also include temporary moves if your home or units you rent to others become uninhabitable from a breakdown. These may consist of loss of heating, air conditioning, or electricity that make premises unlivable. For your businesses, you might recover the expenses of having employees or production occur at an alternate site.

To find the best home insurance Ontario, you need to account for the potential inconvenience and harm that a power surge can inflict. Relying solely on the basic homeowners’ insurance can cost you potentially thousands in uncovered repair bills, replacement costs, and other losses. Your business could take a potentially serious, if not fatal, hit if you don’t insure against boiler or steam ruptures, power surges, engine failures, or other breakdowns. Contact through mail online@myinsurancebroker.com. Or call us at (855) 482-5001