What are the potential liabilities of equipment breakdown for your business? Are you in a position to repair or replace the equipment immediately? Do you have a budget for such emergencies?
If you run a business, you know it is important to have top-quality machines, machinery and tools.
It will help you turn a profit for your business. Without them, you can’t operate, which means no money coming in and no money going out.
When you buy commercial insurance, you have the option of purchasing equipment breakdown coverage. This coverage pays for specific types of damages to your business property. It protects your company from added expenses of replacing or repairing expensive business equipment.
Keep reading to learn more about equipment breakdown insurance cover.
Who Is Equipment Breakdown Coverage For?
Breakdown Insurance covers the repair or replacement of damaged or stolen equipment. If a policyholder takes breakdown insurance on their camera, they can be compensated if it breaks down.
Getting the right breakdown cover for your vehicle is a big responsibility. To determine whether or not you need equipment breakdown coverage, evaluate the following: The probability you will have an actual breakdown.
Breakdown insurance adds little value if your vehicle doesn't need regular repairs. Take into account how expensive repairs are at the dealership. You will not save much with breakdown coverage if they aren't too expensive.
Equipment breakdown coverage is ideal for those who use their equipment. It's also for those who want to repair their equipment but want some protection against catastrophic damage.
Certain businesses are at greater risk for equipment breakdowns. These include construction companies, restaurants, hotels and bars. They rely on heavy machinery to deliver their product or service.
This coverage protects your business against emergencies and breakdown liabilities.
If your equipment is of high value, you can also protect it against theft, vandalism, fire and other covered risks. If you recently purchased expensive equipment and need protection, consider equipment breakdown cover.
What Does Equipment Breakdown Coverage Cover?
Equipment breakdown coverage is a component of a general liability policy. It covers repairs and replacements of your business equipment in case of mechanical breakdown. The damages may be due to power surge, fire, windstorm, vandalism, or theft.
Here are some of the covered items.
Pressurized System Breakdowns
Equipment breakdown coverage covers the breakdown of a piece of equipment or a system. A system can be almost anything. However, it must be a piece of machinery and not a building or plot of land.
The policy does not cover natural disasters like floods, earthquakes, hurricanes, and tornados. It does not cover fire damage, vandalism, theft, or damage caused by poor maintenance. If you want it to cover these risks, communicate with your agent.
If your machine breaks down from normal wear and tear, equipment breakdown coverage may help.
Electrical or Mechanical Breakdowns
Your equipment breakdown coverage covers electrical and mechanical breakdown.
Electrical breakdown covers sudden and accidental failure of electrical components. This includes fuses, circuit breakers, relays, wiring and switches.
Mechanical breakdown covers sudden and accidental mechanical failures. This is attributable to poor quality materials or workmanship.
If you have the right insurance plan, it will cover both electrical and mechanical breakdowns.
But, there are two slight nuances that you should be aware of: Breakdown coverage will only cover equipment while in use. This means if your machine is down but not in use because of a problem, it won't be covered.
Breakdown coverage can only be purchased alongside a comprehensive insurance policy. If you want breakdown coverage, you have to buy comprehensive insurance.
Furnaces and HVAC Systems
Does equipment breakdown coverage cover furnaces and HVAC Systems? Yes, it covers everything on the premises. If something happens to a furnace, AC unit, or any other piece of equipment, this coverage is there to help.
However, there are some restrictions. You can’t change the equipment or add anything new without informing the insurance company first.
The company needs to assess whether or not the new addition is covered under the policy. If it isn’t, they will let you know you need to purchase additional coverage.
Unexpected Repairs or Replacement Costs
Equipment breakdown coverage will cover repairs and replacement costs. However, note that your policy may be different depending on the provider.
Some providers offer more coverage options than others. Others offer other services like rental or loaner equipment and deductibles.
Do your research before purchasing any equipment breakdown coverage. You want to get the right type of coverage at the best price.
Homeowners Equipment Breakdown Coverage
One element that nearly all homeowner's insurance policies cover is home equipment breakdown coverage. This provides some peace of mind for those needing to replace an expensive appliance. However, it's important to understand how this coverage works before purchasing it.
Common Home Appliances
Yes, homeowners' equipment breakdown coverage will cover your home appliances. However, it doesn't cover the loss of use. If a storm takes out your air conditioning unit, it might take a week to fix it. You won't be compensated for that period.
So, homeowners' equipment breakdown coverage is not as comprehensive as you think.
If you want more comprehensive protection for your home appliances, you need to look into appliance insurance. This type of coverage protects your home appliances against all types of damage or loss, such as mechanical failure.
Covers Extra Charges to Speed Up Repairs
Most policies will not cover the extra fees to speed up the repairs. Most insurance companies consider a temporary fix something other than a true repair. So, they won’t cover it.
If you want to get paid quickly, you need an insurance company that has a policy in place to do this.
Replacement of Damaged Property
The answer to this question is not as straightforward as you would imagine. It depends on the type of policy and what you are trying to replace.
If your home has been damaged in a covered loss, most policies will pay to repair or replace damaged property. Companies do not consider the costs associated with repairing or replacing damaged property to be actual losses.
What’s Not Covered by Equipment Breakdown Coverage?
Equipment breakdown coverage can pay for repairs or replacement of your business equipment. However, what happens if you have to replace all your computers at once? Or your entire inventory?
In these cases, equipment breakdown coverage does not cover it.
When you're purchasing equipment breakdown coverage, be sure to ask, "what's not covered by equipment breakdown coverage?" Here are some things which may fall outside the scope of coverage:
Normal Wear and Tear
If an item breaks down due to normal wear and tear, it will not be covered by a breakdown policy. For example, if your dishwasher breaks down after three years of use, it will not be covered by a breakdown policy.
Accidental Damage
An item will not be covered if it is damaged accidentally. For example, if you accidentally drop your phone and the screen cracks.
Loss or Theft
A breakdown policy will not cover the loss or theft of an item. It will also not cover an item if it is damaged due to neglect or misuse.
Some policies will cover theft while others don't. If theft is a high-risk problem for your equipment, ascertain the equipment breakdown policy covers it.
Always review your priorities to determine which company offers the best package.
Difference Between Wear and Tear and Equipment Breakdown
These are two different concepts, although people frequently confuse them.
Wear and tear are associated with the physical structure of a machine. For example, the motor on a car or truck will physically break down over time and require replacement. This is known as wear and tear.
Wear and tear are a cost that your company will have to invest in from time to time.
Equipment breakdown is the unexpected failure or damage to equipment. It occurs during normal usage. Examples of equipment breakdown include a machine that suddenly stops working without warning signs (due to a malfunctioning part).
Equipment breakdown is usually not associated with the physical structure of a machine. It can be due to software failure in the machine. A good example is an ATM.
The software might stop working properly, leading to a breakdown. Wear and tear are predictable, while breakdown is unpredictable but foreseeable.
What to Look for in a Company that Offers Equipment Breakdown Insurance
There are a lot of companies out there that offer this kind of insurance. It can get confusing trying to determine which one is best for your business.
Equipment breakdown insurance is a kind of insurance policy that covers the cost to repair or replace your equipment in case of an unexpected breakdown.
Choose the best company for this type of insurance. Remember, the policy covers all your equipment, not just one particular piece. Find out how much it costs and if the price fits your budget.
Check if the coverage terms and conditions are fair. What are the deductible amounts, the procedure to make a claim, and other details? The customer service and compensation rate are important variables to consider.
Review the company's reputation online and from friends. Without the right protection, your company may suffer huge losses. Work with a certified insurance company.
The government of Canada offers insurance compliance acts. Your lawyer can help determine the credibility of the company.
Checking certification sounds obvious. However, many people forget to do due diligence. It protects you from working with fraud.
Before signing that policy agreement, ensure all verbal agreements are in writing. If some terms are not familiar, consult a lawyer.
Typical Costs of Equipment Breakdown Insurance
Before you purchase coverage, consider how much it will cost you in the long run. Know exactly what your costs will be. It helps determine whether insurance is worth the money.
The cost of equipment breakdown insurance varies depending on the type of business and the area you live.
For a small local business with a few fixed assets such as a shop or office, the cost is between $500 to $1000 per year. The premium for large national companies is higher. It starts at about $5000 a year and goes up from there, depending on the value of their assets.
Equipment breakdown insurance pays for certain repairs and replacement costs. This could be caused by defective parts, accidents, natural disasters, fire and theft.
The cost of equipment breakdown insurance is based on factors such as:
Age
The older your equipment is, the costlier e it is to repair or replace it. Get insurance for your valuable equipment as soon as you buy them.
Location
If your equipment is in a remote location, the policy is more costly. Also, if your region has a high crime rate, the cover will be more expensive.
Size
The larger your equipment is, the more expensive it will be to repair or replace. In analyzing size, the value of the equipment matters. High-value equipment attracts higher premium costs.
Use
If you use your equipment regularly, it will cost you more. The probability of equipment breakdown with regular use is higher.
The insurance provider has to spread their costs across as many policies as possible.
The Takeaway
As you can see, equipment breakdown coverage has many benefits. That’s why business owners should consider purchasing a policy.
Your business doesn't have to stop due to equipment failure. You can have a backup plan with equipment breakdown coverage. Partner with a reliable company for proper coverage.
Insurdinary takes the guess work out of shopping for the best Equipment Breakdown policies. We have partnered with APOLLO Insurance and are thrilled to be able to provide you with not only the best coverage in the country, but with the best client service team as well. Engage with APOLLO today. One of their experienced agents is looking forward to working with you.
