What is equipment breakdown insurance?

At a glance: Equipment breakdown insurance, sometimes referred to as Boiler and Machinery insurance, covers sudden, accidental damage to your electrical, mechanical and other equipment that commercial insurance normally doesn’t.

What does equipment breakdown insurance cover?

Equipment breakdown insurance covers 5 specific types of property loss or damage normally not covered by commercial insurance. These are:

  • Mechanical breakdown, such as motors, generators, elevators and pumps
  • Electrical such as power transformers and electric panels
  • Computers & communication including telephone, security, and fire systems
  • Boilers and pressure vessels such as equipment used for heat, hot water, steam production, cooking, cleaning, and sterilizing
  • Refrigeration & air conditioning units including freezers, chillers, and cooling towers

Protection against equipment breakdown is critically important for businesses relying on these types of equipment to keep operations running efficiently and without interruption.

Depending on your policy, indirect damage as a result of equipment breakdown may be included or available as endorsements, such as for business interruption, food spoilage, and more. Always speak with a broker to assess your risks and avoid potentially costly gaps in your coverage.

Who needs equipment breakdown insurance?

Until recent years, equipment breakdown insurance was only seen as a necessity for manufacturing, processing, wholesaling, and other large operations. Times have changed, and equipment breakdown coverage is now a necessity for many type of small businesses as well. Today, nearly every business, large and small, relies on some piece of technology or electrical equipment to function.

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Equipment breakdown coverage vs. commercial property insurance

The main difference between equipment breakdown coverage and regular commercial insurance in the source of damage. Commercial property insurance will normally protect you from external perils such as fire, wind, or vandalism, whereas equipment breakdown insurance will cover internal forces, such as mechanical breakdown, power surges, electrical short circuits, and operator error.

Examples of equipment breakdown coverage

  • If a power surge caused by extreme weather wipes out your computer system or a piece of equipment suddenly malfunctions, equipment breakdown insurance can cover the costs of repair and replacement.
  • If a compressor fails, causing the air conditioning system to break down, this too would be covered.
  • In contrast, if a piece of equipment breaks down because it has been used so long that its usefulness has been exhausted, then that would be excluded, as only sudden and accidental damage is covered

Frequently asked questions about equipment breakdown insurance

No, wear and tear is not covered by equipment breakdown insurance, as it does not constitute sudden, accidental damage,i.e., the result of unexpected and non-deliberate action. Also excluded from equipment breakdown coverage is lack of maintenance, corrosion, decay, deterioration, and hidden defects that cause property damage.

There are a few issues with relying on extended warranties to cover your equipment. The coverage offered by warranties is often limited to certain parts of the equipment and for a limited time, with breakdowns usually occurring long after the warranty expires. Another significant consideration is that warranties typically don’t cover operator error, so if you’re found to be responsible for damage, you won’t be covered. Equipment breakdown is a safer more cost-effective solution.

Boiler and machinery insurance and equipment breakdown insurance are interchangeable; however, the former has largely fallen out of use, since ‘equipment breakdown’ is a more appropriate term for today’s coverage. This type of coverage now includes a broad range of modern technological equipment, well beyond just boilers and machinery.

Your business is unique, so are your insurance options.

Being a brokerage for over 70 of Canada’s top insurance companies means our commercial brokers have access to a wide range of coverage options as unique as your business – at some of the best rates in Ontario. We sweat the details so you can focus on your business. Want to learn more about the coverage options available to you? Here’s a few of them: