Equipment Breakdown Coverage
Coverage for loss resulting from the mechanical or electrical breakdown of equipment, boilers, and machinery not covered by standard property insurance.
What It Is
Equipment Breakdown Coverage, formerly known as Boiler and Machinery insurance, covers direct physical loss or damage resulting from the mechanical or electrical breakdown of covered equipment. Standard property insurance excludes losses caused by equipment breakdown, making this coverage an essential supplement.
Covered equipment typically includes boilers, pressure vessels, HVAC systems, electrical panels, transformers, generators, compressors, refrigeration units, computer systems, and telecommunications equipment. The coverage extends to the cost of repairing or replacing the broken-down equipment plus resulting damage to other property and business income loss.
Modern equipment breakdown coverage has expanded well beyond traditional boiler and machinery risks to cover virtually any type of mechanical, electrical, or electronic equipment that a business relies on.
Why It Matters for Brokers
Equipment breakdown is one of the most overlooked coverages in commercial insurance. Many brokers and their clients do not realize that a standard property policy excludes losses from equipment failure — a common cause of loss for businesses that depend on mechanical or electrical systems. Brokers who proactively recommend equipment breakdown coverage demonstrate risk management expertise and protect clients from a significant uninsured exposure. This coverage is inexpensive relative to the exposure it addresses.
Real-World Example
A restaurant's walk-in cooler compressor fails on a Saturday night, and the resulting temperature spike spoils $35,000 in perishable food inventory. The standard property policy excludes the loss because it resulted from equipment breakdown, not a covered peril. The restaurant's equipment breakdown coverage pays $8,000 for the compressor replacement and $35,000 for the spoiled inventory, subject to a $2,500 deductible.
Common Mistakes
- 1Assuming standard property insurance covers equipment failure when it explicitly excludes mechanical and electrical breakdown.
- 2Not recommending equipment breakdown to manufacturing, food service, and healthcare clients whose operations depend heavily on specialized equipment.
- 3Failing to include business income coverage in the equipment breakdown policy, which covers lost revenue during the repair period.
How brokerageaudit.com Handles This
Policy Checker flags commercial property policies that lack equipment breakdown coverage and identifies accounts where the insured's operations suggest significant equipment dependency.