Equipment Breakdown InsuranceProtect Your Business Machinery
When critical equipment fails unexpectedly, the costs can be devastating. Equipment breakdown insurance covers repair and replacement costs, plus lost income, when your machinery suddenly stops working.
Standard Property Insurance Doesn't Cover Equipment Breakdown
Most commercial property policies specifically exclude damage from mechanical breakdown or electrical failure. When your HVAC system burns out, your boiler fails, or your production equipment stops working due to internal mechanical problems, you need equipment breakdown coverage to fill this critical gap.
Don't Wait Until Equipment Fails
Our specialists can review your equipment exposure and recommend the right coverage limits for your business.
Complex mechanical systems require specialized breakdown protection
Introduction to Equipment Breakdown Insurance
Modern businesses depend on equipment like never before. From the HVAC system that keeps your building comfortable to the production machinery that manufactures your products, equipment failures can bring operations to a complete halt. Equipment breakdown insurance—historically known as boiler and machinery insurance—provides essential protection when critical systems suddenly fail.
Unlike fire, theft, or weather damage covered by standard property policies, mechanical and electrical breakdowns occur from within the equipment itself. A motor burns out, an electrical panel shorts, a compressor seizes—these internal failures are specifically excluded from most commercial property coverage. Equipment breakdown insurance fills this gap, covering repair costs, replacement equipment, and the business income lost while you're shut down.
At Steele Insurance Agency, we've helped New York businesses protect their critical equipment since 1969. Whether you operate a restaurant relying on refrigeration, a manufacturing facility with complex production lines, or an office building with sophisticated HVAC systems, we can design equipment breakdown coverage tailored to your specific equipment risks.
What Is Equipment Breakdown Insurance?
Equipment breakdown insurance is a specialized form of commercial coverage that protects businesses against losses resulting from the sudden and accidental failure of covered equipment. This includes mechanical breakdown, electrical damage from power surges, operator error, and failure of pressure equipment.
Originally developed in the 1800s to cover steam boiler explosions, this coverage has evolved to protect the wide range of mechanical, electrical, and pressure equipment that modern businesses rely on. Today's policies cover everything from industrial production machinery to computer systems, HVAC equipment to commercial refrigeration.
The Coverage Gap Problem
Standard commercial property insurance covers equipment damage from external causes like fire, lightning, vandalism, or weather. However, these policies specifically exclude damage that originates within the equipment itself. When a compressor fails due to bearing wear, when an electrical motor burns out from overheating, or when a boiler malfunctions—your property policy won't respond.
This creates a significant coverage gap for businesses. Studies show that internal equipment failures are actually more common than losses from fire or weather. Without equipment breakdown insurance, businesses face the full cost of repairs, replacement equipment, and lost income out of pocket.
Key Coverage Components
A comprehensive equipment breakdown policy typically includes:
- Property Damage Coverage: Pays to repair or replace equipment that suffers covered breakdown
- Business Income Coverage: Reimburses lost income and ongoing expenses while equipment is being repaired
- Extra Expense Coverage: Pays additional costs to expedite repairs or maintain operations during breakdown
- Spoilage Coverage: Covers loss of perishable goods due to equipment failure (refrigeration, climate control)
- Hazardous Substances: Covers cleanup costs if breakdown releases hazardous materials
- Data Restoration: Covers cost to restore electronic data lost due to equipment breakdown
Covered Equipment Types
- HVAC systems and chillers
- Boilers and pressure vessels
- Electrical panels and wiring
- Refrigeration equipment
- Production machinery
- Computers and servers
- Phone and communication systems
- Elevators and escalators
- Generators and transformers
Who Needs Equipment Breakdown Insurance?
Any business that relies on mechanical, electrical, or pressure equipment to operate should consider equipment breakdown coverage. The more dependent your operations are on functioning equipment, the more critical this coverage becomes. Here are industries with particularly high equipment risks:
Manufacturing Facilities
Production machinery, conveyor systems, assembly equipment, compressors, and quality control instruments are essential to operations. A single breakdown can halt production lines entirely.
Restaurants and Food Service
Commercial refrigeration, freezers, ovens, dishwashers, and HVAC systems are critical. Refrigeration failure alone can result in thousands of dollars in spoiled food inventory.
Commercial Real Estate
Office buildings, shopping centers, and apartment complexes rely on elevators, HVAC systems, boilers, and electrical infrastructure to maintain tenant satisfaction and lease obligations.
Healthcare Facilities
Medical equipment, climate control systems, sterilization equipment, and backup generators are essential for patient care and regulatory compliance.
Data Centers and Tech Companies
Servers, cooling systems, UPS systems, and telecommunications equipment must operate continuously. Even brief outages can cause significant financial and reputational damage.
Grocery and Cold Storage
Extensive refrigeration and freezer equipment protects valuable perishable inventory. Temperature fluctuations from equipment failure can destroy entire stock in hours.
Hotels and Hospitality
Guest comfort depends on functioning HVAC, elevators, commercial laundry equipment, and kitchen appliances. Equipment failures directly impact guest satisfaction and revenue.
Printing and Publishing
High-speed presses, binding equipment, cutting machines, and climate control for paper storage represent significant equipment investments that require protection.
Schools and Universities
Boilers, HVAC systems, food service equipment, and computer labs must function reliably. Equipment failures can disrupt education and violate occupancy requirements.
What's Covered vs. What's Not Covered
Typically Covered
- ✓Mechanical breakdown of equipment components (motors, bearings, gears, compressors)
- ✓Electrical damage from power surges, arcing, or short circuits
- ✓Boiler and pressure vessel failures including explosion
- ✓Accidental damage from operator error during normal use
- ✓Centrifugal force damage to rotating equipment
- ✓Business income lost during equipment repair period
- ✓Extra expenses to expedite repairs or rent temporary equipment
- ✓Spoilage of perishable goods from refrigeration failure
- ✓Data restoration costs after computer equipment breakdown
- ✓Hazardous material cleanup if released during breakdown
- ✓Consequential damage to other property from equipment failure
Typically Not Covered
- ✗Fire damage (covered under property insurance)
- ✗Weather-related damage (wind, flood, lightning)
- ✗Normal wear and tear or gradual deterioration
- ✗Deferred maintenance or neglect of equipment
- ✗Damage during testing, commissioning, or installation
- ✗Manufacturing defects covered by warranties
- ✗Vehicles licensed for road use (covered by auto insurance)
- ✗Intentional damage or misuse of equipment
- ✗Equipment covered under separate specialty policies
- ✗Nuclear reaction, radiation, or radioactive contamination
- ✗War, military action, or government seizure
Factors That Affect Equipment Breakdown Insurance Costs
Equipment breakdown insurance is generally affordable relative to the protection it provides. Many businesses add this coverage as an endorsement to their commercial property policy, which can be more economical than a standalone policy. Here are the primary factors that influence premium costs:
Equipment Value and Type
The total insured value of covered equipment directly affects premiums. Specialized or high-value equipment like manufacturing machinery, medical equipment, or data center infrastructure costs more to insure than standard office HVAC systems.
Industry and Risk Profile
Some industries have higher equipment breakdown frequency. Heavy manufacturing, food processing, and data centers typically face higher premiums than office-based businesses due to greater equipment complexity and utilization.
Coverage Limits Selected
Higher coverage limits for property damage, business income, and spoilage coverage increase premiums. Work with your agent to balance adequate protection against premium costs based on your actual exposure.
Deductible Amount
Higher deductibles result in lower premiums. Consider your ability to absorb smaller losses when selecting deductible levels. Some policies offer separate deductibles for property damage and business income coverage.
Equipment Age and Condition
Older equipment may be more prone to breakdown and can result in higher premiums or coverage restrictions. Well-maintained equipment with documented service records may qualify for better rates.
Business Income Exposure
If your business would experience significant income loss during equipment downtime, higher business income limits increase premiums. Consider how long repairs might take and your revenue dependency on each piece of equipment.
Typical Premium Ranges
Equipment breakdown coverage typically costs between $500 to $5,000+ annually for small to mid-sized businesses, depending on equipment values and coverage limits. Larger operations with extensive equipment may pay significantly more. When added as an endorsement to an existing property policy, the cost is often surprisingly affordable—frequently just 5-15% of the base property premium. Contact us for a customized quote based on your specific equipment inventory.
Protect Your Equipment Investment Today
Don't wait for a breakdown to discover your property policy won't respond. Our equipment breakdown specialists can review your equipment exposure and recommend appropriate coverage limits.
Real-World Equipment Breakdown Claims Examples
These examples illustrate how equipment breakdown insurance responds to common business losses. Each scenario shows how this coverage fills the gap left by standard property policies:
Walk-In Refrigerator Compressor Failure
A busy restaurant's walk-in refrigerator compressor fails over a holiday weekend. By the time staff discovers the problem Monday morning, thousands of dollars in food inventory has spoiled. Equipment breakdown coverage pays for the compressor repair, the spoiled food inventory, and the emergency rental of a temporary refrigeration unit while repairs are completed.
CNC Machine Motor Burnout
A precision manufacturing company's CNC milling machine experiences a motor burnout, halting production of critical customer orders. The specialized motor requires 3 weeks to obtain and install. Equipment breakdown insurance covers the motor replacement, express shipping to expedite delivery, lost business income during downtime, and extra expenses to outsource some production to meet deadlines.
Boiler Failure in Winter
A commercial office building's heating boiler fails during a January cold snap. Without heat, the building cannot be occupied, and pipes are at risk of freezing. Equipment breakdown coverage pays for emergency boiler repairs, portable heating units to prevent pipe damage, and the building owner's loss of rental income until heat is restored.
Uninterruptible Power Supply Failure
A data center's UPS system fails during a brief power outage, causing an uncontrolled shutdown of servers. Some hard drives are damaged, and client data must be restored from backups. Equipment breakdown coverage pays for UPS system repair, damaged server components, data restoration services, and business income lost while systems are down.
Electrical Panel Arc Flash
A retail store's main electrical panel experiences an arc flash event, cutting power to the entire store. The resulting damage affects the panel, several circuits, and some point-of-sale equipment. Equipment breakdown insurance covers panel replacement, rewiring, damaged POS equipment, and business income lost during the week-long repair.
Frequently Asked Questions
What is equipment breakdown insurance?
Equipment breakdown insurance, formerly known as boiler and machinery insurance, covers the cost of repairing or replacing business equipment that fails due to mechanical breakdown, electrical damage, or other covered perils. It also covers resulting business income loss and extra expenses incurred while equipment is being repaired or replaced.
Does my commercial property policy cover equipment breakdown?
Standard commercial property policies typically exclude equipment breakdown caused by mechanical or electrical failure. Property policies cover damage from external causes like fire, theft, or weather. Equipment breakdown insurance fills this gap by covering sudden and accidental breakdown that results from internal equipment failure rather than external causes.
What types of equipment are covered by equipment breakdown insurance?
Equipment breakdown insurance covers a wide range of equipment including HVAC systems, boilers, pressure vessels, electrical panels and wiring, refrigeration units, production machinery, computers and servers, phone systems, elevators, generators, and other mechanical and electrical equipment used in business operations. Coverage can be tailored to your specific equipment inventory.
How much does equipment breakdown insurance cost?
Equipment breakdown insurance typically costs between $500 to $5,000+ annually for small to mid-sized businesses. Costs depend on the type and value of equipment, industry risk factors, coverage limits, and deductible amounts. Many businesses add this coverage as an endorsement to their property policy, which is often the most cost-effective approach.
Does equipment breakdown insurance cover loss of income?
Yes, comprehensive equipment breakdown policies include business income coverage that reimburses lost income and ongoing expenses when a covered equipment breakdown interrupts your business operations. This coverage continues until equipment is repaired or replaced and operations resume, subject to policy limits.
Is equipment breakdown insurance the same as a warranty or service contract?
No. Warranties and service contracts typically cover repair costs only and often exclude older equipment or have limited coverage periods. Equipment breakdown insurance is broader, covering not just repair costs but also business income loss, spoilage, extra expenses, and consequential damage. It also covers equipment regardless of age or warranty status.
How do I file an equipment breakdown claim?
Contact your insurance agent or carrier immediately when equipment fails. Document the equipment condition with photos before repairs. Keep all repair invoices, rental equipment receipts, and records of business interruption. Most policies require prompt notification and may have provisions for emergency repairs before formal approval.
Related Business Coverage Options
Equipment breakdown insurance works best as part of a comprehensive business insurance program. Consider these related coverages to ensure complete protection:
Commercial Property Insurance
Covers your building, equipment, and inventory from fire, theft, and weather damage—complementing equipment breakdown coverage.
Business Interruption Insurance
Broader income protection for various business disruptions beyond equipment breakdown scenarios.
Business Owners Policy (BOP)
Combined property and liability coverage for small businesses, often with equipment breakdown available as an add-on.
Inland Marine Insurance
Coverage for mobile equipment, tools, and property in transit that may not be covered by standard property policies.
Cyber Liability Insurance
Comprehensive cyber coverage including network security, data breach response, and business interruption from cyber events.
General Liability Insurance
Essential coverage for third-party bodily injury and property damage claims arising from business operations.
Important Disclaimer
This information is provided for educational purposes only and should not be construed as legal or insurance advice. Equipment breakdown insurance policies vary significantly between carriers, and coverage terms, conditions, exclusions, and limitations differ by policy. Always review your specific policy documents carefully and consult with a licensed insurance professional to understand your coverage options and ensure adequate protection for your equipment risks. Policy availability and terms may vary by state and are subject to underwriting approval.
Get Equipment Breakdown Coverage Today
Don't let an equipment failure become a financial disaster. Contact Steele Insurance Agency to review your equipment exposure and get a customized quote for comprehensive equipment breakdown protection.
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