Your business relies on specialized equipment to operate every day. From the point-of-sale system at your retail counter to the ovens in your bakery, this machinery is essential. A standard commercial property insurance policy provides a solid foundation of protection. It often covers damage from external events like fire or theft. However, it may not cover the costs when equipment fails due to an internal issue.
This is where equipment breakdown insurance comes in. This vital coverage protects your business from the significant financial impact of sudden and accidental equipment failures. Understanding how it works can help you secure your operations and protect your bottom line.
What commercial property insurance typically covers
It’s a common misconception that a commercial property policy covers every type of damage to your business assets. While this policy is crucial, its coverage has specific limits.
Commercial property insurance is designed to protect your physical assets from external threats. This includes your building and its contents, such as furniture, inventory, computers, and machinery.
Think of it as protection against outside forces. For example, if a storm damages your building’s roof, causing water to leak in and ruin your computers, your commercial property policy would likely respond.
Common covered perils include:
- Fire
- Theft
- Vandalism
- Severe weather events
- Water damage from burst pipes
However, this policy usually excludes damage caused by internal problems within the equipment itself, such as a mechanical failure or an electrical surge.
The role of equipment breakdown insurance
Equipment breakdown insurance fills this critical gap. It is specifically designed to cover the sudden and accidental breakdown of your machinery due to an internal cause. This can include electrical, mechanical, or pressure system failures.
Without this coverage, you would be responsible for the full cost of repairing or replacing the equipment. These expenses can be substantial and can disrupt your business operations for an extended period.
Examples of internal causes covered by equipment breakdown insurance include:
- Power surges that damage electronics
- Motor burnouts
- Boiler explosions
- Mechanical failures, like a bearing seizure in a motor
- Cracking or fracturing of components
In short, while property insurance covers damage to your equipment from the outside, equipment breakdown insurance covers damage from within the equipment.
Which businesses need equipment breakdown insurance?
Nearly every modern business depends on some form of mechanical or electrical equipment. The increasing sophistication of technology means that repairs are more complex and costly than ever before. This makes equipment breakdown insurance a valuable consideration for businesses across many sectors. Here are some industries and sectors that should consider additional equipment breakdown coverage:
- Restaurants and food services
- Contractors and skilled trades
- Retail stores
- Manufacturing and production
- Office-based businesses
What does equipment breakdown insurance cover?
This coverage is comprehensive and can provide financial support for a variety of costs associated with an equipment failure, including:
- Repair or replacement costs: The most direct benefit is covering the cost to repair or replace the damaged machinery with equipment of similar quality.
- Business interruption: If the breakdown forces you to temporarily close your business, this coverage can help replace the income you lose during that time.
- Spoilage: For businesses like restaurants or grocery stores, a refrigeration failure can lead to thousands of dollars in spoiled goods. Equipment breakdown coverage can reimburse you for this loss.
- Extra expenses: This coverage may also cover the extra expenses needed to get your business running again, such as the cost of renting temporary equipment or paying for rush repairs.
Protect your business from unexpected breakdowns
No matter your industry, your equipment is a valuable asset that is vital to your success. While a standard commercial property policy is a great start, it doesn’t cover every risk. An internal failure can happen without warning, leading to costly repairs and significant business disruptions.
That’s why it’s important to have the right protection in place. Northbridge can help minimize risk for contractors with a tailored business insurance policy. To learn more about protecting your business, visit our Business Insurance page today!
