Equipment breakdown insurance covers sudden accidental mechanical or electrical failure of covered equipment and the business losses that follow. It fills a gap left by many commercial property policies, which usually respond to outside causes of loss but not internal machine breakdown.
What it usually covers
Depending on the form, coverage can apply to:
- boilers and pressure vessels
- HVAC systems
- refrigeration units
- electrical panels and transformers
- production machinery
- computers and other critical equipment
Covered loss may include repair or replacement of damaged equipment, business income loss, extra expense, spoilage, and sometimes data restoration. The trigger is usually an accidental breakdown such as arcing, short circuit, centrifugal force failure, or mechanical rupture.
What it does not replace
Equipment breakdown insurance is not a maintenance contract. It does not pay for routine wear and tear, poor upkeep, or gradual deterioration by themselves. It is designed for a sudden covered breakdown event and the resulting damage.
It also does not replace ordinary commercial property insurance. If a fire damages the building, the property policy may respond. If an internal electrical failure causes the chiller to fail and product spoils, the equipment breakdown form may be the key coverage.
Practical example
A grocery store’s refrigeration compressor suffers an internal electrical failure overnight. The compressor must be replaced, several coolers stop working, and perishable inventory is lost. Equipment breakdown coverage may pay for the damaged unit, the spoiled stock, and the extra cost of renting temporary refrigeration so the store can stay open.