WHAT IS THE EQUIPMENT BREAKDOWN INSURANCE?
No matter what kind of small business you operate, you likely rely on some sort of equipment to get the job done. It’s important to ensure that Equipment Breakdown is protected with the right small business insurance policy.
What used to be known as Boiler and Machinery Insurance is now called Equipment Breakdown Insurance. This coverage protects businesses that operate heavy machinery against common mishaps including explosions, malfunctions and breakdowns as well as any damage caused by fires, storms or other natural disasters and can be essential to a company’s survival after disaster strikes.
- DOES MY BUSINESS NEED IT?
Because this insurance mostly covers heavy machinery, this type of insurance made sense in the past for large manufacturing companies to acquire. But nowadays, most businesses rely on electronic parts, some even depend their workload on these electronics.
Almost all of businesses nowadays rely on some sort of equipment, whether be it technical, digital, or electrical. Small and big businesses depend their daily productivity on their equipment, and sudden or accidental loss of this machinery is going to cause a problem and can even lose a day’s income. And although technology has been having a speedy progress, most electronic equipment tends to be more fragile than the traditional ones.
But these type of businesses, no matter the size, should consider equipment breakdown coverage:
- Restaurants and bakeries – this is because they rely on electrical kitchen equipment most of the time.
- Property owners with security systems in place, air conditioning, or generators – this are mainly banks, malls, and even private hospitals.
- Contractors and other skilled tradespeople that requires equipment on jobsites – these are mainly manufacturing factories, construction sites, and power plants
- WHAT DOES IT COVER?
Even if you don’t have your own building, it’s smart to have the breakdown insurance. If your business is dependent upon properly-functioning machinery owned, then this insurance policy is essential to the success of your business.
For an instance, if you own a pizza shop that depends on online orders, as well as walk-in customers, your business will suffer if the power goes out due to a power surge. A power outage could result in loss of heat or air, the inability to process online orders, as well as the inability to prepare, cook, serve and sell food. And if the power is out long enough, your food inventory could spoil.
The breakdown insurance can help you pay for:
- Spoiled inventory. The cost to replace any spoiled food
- The costs to repair or replace damaged equipment, including time and labor
- Lost income. Business income you lost while the power was out
- Necessary expenses incurred during the restoration period
- TYPES OF EQUIPMENT IT COVERS
There are five categories of equipment that the equipment breakdown insurance typically covers:
- Boilers and pressure equipment
- Air conditioners and refrigeration systems
- Mechanical equipment, which includes engines, motors, elevators, generators, water pumps, and specialized production and manufacturing machinery.
- Computers and communications, which includes phone systems, computer systems, security systems, voice mail systems, and fire alarm systems.
- Electrical equipment, including transformers, electrical panels and cables
- ISN’T EQUIPMENT BREAKDOWN COVERED BY PROPERTY INSURANCE?
Most commercial property insurance policies for small business are designed to protect both the building you operate out of and the contents inside. Commercial property insurance can protect a long list of possessions from specific losses including equipment, inventory, furniture, computers and other electronics. It can also provide protection for things outside of the building, which can include outdoor signs, fencing and landscaping. Unfortunately, your commercial property policy may not cover you for another problem: the sudden, accidental breakdown of your company’s vital equipment. It covers damages caused by covered internal forces, such as power surges, electrical shorts, mechanical breakdowns, motor burnout or operator error
Keep in mind that even though equipment breakdown insurance covers computers, it does not cover software. To fully protect your computer systems, including software, you’ll need cyber liability insurance.
- WHAT’S NOT COVERED BY THE EQUIPMENT BREAKDOWN INSURANCE?
Business owners need to understand that because there are 21 specific exclusions, it leaves the carrier a tremendous opportunity to deny or limit coverage based on interpretation. To name a few, the anti-microbial exclusion, wet rot, dry rot, ordinances or law coverage, earth movement, nuclear hazard, war, explosion, and viruses.
- IS LOSS OF BUSINESS INCOME COVERED UNDER THIS TYPE OF POLICY?
It isn’t normally afforded as part of the policy, unless the business owner specifically select it as part of the coverage. Even if it took six months on a covered cause of loss to put everything back together, they would have to have a war chest large enough to maintain the salaries and operating costs of their business if they have not selected that coverage.
- WHAT’S THE TYPICAL TURNAROUND TIME TO INSPECT THE DAMAGED EQUIPMENT?
If there is a widespread disaster and it is not only your business that is affected, it might take days or even weeks before the company’s adjuster shows up on your doorstep. As a business owner, you want to make sure you are represented. You can hire of a loss consultant or a public adjuster who can identify and quantify the damage in accordance to the policy and help put in place a plan to minimize loss of business operations which an adjuster can get on board with.
- WHAT ARE THE COMMON MYTHS OF THE WARRANTY?
Typically when purchasing expensive parts, you’re automatically offered a manufacturer’s warranty. Whether you added another type of warranty or it’s already included, warranties can be extremely helpful for a small business owner. However, it’s important to read what is and isn’t covered in your machinery warranty very carefully. Some small business owners don’t think they need breakdown insurance because their equipment is still under warranty, but that isn’t always the case.
One of the main things that often isn’t covered in a warranty is operator error, which means if the damage to the equipment is found to be caused by the individual operating it, your warranty won’t cover the repair or replacement costs. Some breakdown policies may cover situations such as these.