What equipment do you use in your business? What would you do if any piece of that equipment were to break down? For instance, how could you operate your restaurant if your ovens, stoves, or fryers were not working properly? Or if the machine in your manufacturing facility that generates a large amount of your finished goods breaks down? And let’s not even think about what would happen to your frozen foods if the refrigerated coolers in your grocery store quit working in the hottest part of the summer!
Property coverage forms generally exclude losses that are caused by mechanical breakdown, artificially generated electrical currents, and explosion of steam boilers and steam pipes. This is where Equipment Breakdown Coverage steps in and fills that gap. Covered equipment in an Equipment Breakdown policy is normally anything that generates, transmits, or utilizes energy, including electronic communications and data processing equipment. Anything that normally operates under vacuum or pressure is also covered. Think of your computers, and all other electronic equipment you have. Even the simplest of businesses uses a variety of these things.
You may think you don’t need Equipment Breakdown coverage if you have newer equipment with outstanding warranties, but when you rely only on the warranty you create more work for yourself by needing to keep track of documentation of the purchase and whether or not the warranties are still valid. When running a business, this is not usually a priority. Another problem with relying on warranties is most of them limit what it is they will actually cover. Typically, a warranty will only cover the cost of the replacement part or unit. Items not usually covered include the cost of the labor, any extra expenses incurred for a temporary fix, or the business income loss from having to shut down your business.
Another advantage to carrying Equipment Breakdown coverage involves the inspection process. All states require that boilers be inspected to ensure safe operation. If the state does the inspection there is generally a charge for this. Most companies that offer Equipment Breakdown coverage will perform the necessary inspection with charging a service fee. Filing fees may still be required by the state.
Ultimately, you need to ask yourself if the premium charge for the coverage is worth the satisfaction of knowing your business won’t suffer a financial loss if there is an interruption. If your agent hasn’t already discussed Equipment Breakdown coverage with you, check with them on what coverage you might already have, or what is available to you with your current carrier. Not all companies offer Equipment Breakdown coverage; you may have to purchase this coverage from a carrier other than the one that provides your primary property policy. It could also be added as another peril (cause of loss) to your current policy. You might find that it’s well worth the premium to have the peace of mind.
The coverages described here are in the most general terms and are subject to the actual policy conditions and exclusions.
Blog post courtesy of the Central Insurance Companies