As a business owner, you may have been presented a quote by your broker for Equipment Breakdown (aka Boiler & Machinery) coverage. You may have even seen this coverage as a line item on a property, package or business owner’s package (BOP) quote.
In many parts of the country, boilers are no longer used, but this coverage is still valuable for many reasons.
What Is Equipment Breakdown?
Decades ago, this coverage was called Boiler & Machinery and was designed to cover boilers and production machinery used by factories and other businesses. Over time this coverage was expanded to cover such things as air conditioning units and elevators, so the coverage was renamed to Equipment Breakdown insurance.
Equipment Breakdown insurance is property coverage. Heating and air conditioning equipment, as well as other machinery components now rely heavily on electricity. Electrical arcing, which is excluded by the property coverage form, is a major reason for equipment breakdown and would be covered under equipment breakdown insurance.
What Does Equipment Breakdown Cover?
This coverage is designed to cover a significant gap in the Building & Business Personal Property coverage form that specifically excludes:
- Mechanical breakdown
- The explosion of boilers and pressure vessels and
- Electrical arcing
The systems that are usually affected by these claims include:
- Electrical systems
- Heating, air conditioning, and refrigeration
- Boiler & other pressure vessels
- Computers and communications equipment
- Production systems
- Alternative energy systems
Some claim examples:
An air conditioning motor burned out in a high rise senior citizens apartment complex at the height of summer. “Spot coolers” were rented to keep the place cool while employees worked overtime to repair the damage and get the units back up and running. The total claim was over $100,000.
A seafood processing plant experienced an ammonia line ruptured when a compression crankshaft and connection rod broke. Fresh seafood was contaminated with ammonia, resulting in a loss to stock, as well as the cost to rent replacement units while the new compressor was installed. The claim total was over $65,000.
It should be noted that equipment breakdown policies are NOT maintenance policies. Damage or destruction due to rusting, corrosion, age or failure to properly maintain equipment is not covered.
Do You Need Equipment Breakdown Insurance?
Every business should have equipment breakdown insurance. Check your policy to see if there is coverage for equipment breakdown or boiler & machinery, as some policies may include this coverage. Others may specifically exclude it and your broker may have quoted a separate policy for this coverage.
Equipment breakdown insurance doesn’t just cover the physical equipment. Some policies may include loss of income and extra expense coverage in case your breakdown requires moving to a temporary new location or causes your business to close for a short time.
If your policy review doesn’t make things clear, talk to Hayes Brokers about getting this valuable coverage. A risk management analysis conversation may expose coverage gaps you didn’t even know you had.