As a business owner, you know what it’s like to wear a lot of hats. With so much to keep track of, you might overlook an essential protection—equipment breakdown insurance.
But, operating your company without this protection in place can leave you at risk for significant losses. You wouldn’t dream of unlocking your front door every day without offering protection against a potential customer or employee slip and fall. Yet, many business owners place the lifeblood of their business at stake each day by failing to obtain this critical insurance policy.
Take a look.
What is Equipment Breakdown Insurance?
Equipment Breakdown Insurance protects you from losses which result from mechanical or electrical equipment in your business. These items may include the following:
- Office equipment, including computers, printers, photocopiers
- HVAC and mechanical systems
- Security systems
- Industry-specific electrical equipment that you need to operate. Example: refrigerators for a convenience store or ovens for a bakery.
It helps you pay for the repairs or replacement of this equipment after you’ve suffered a covered incident that caused the damage. And, depending on your policy, this coverage may offer reimbursement to help you replace spoiled foods or perishable items. Your insurance agent can guide you on this.
Defining Covered Incidents
Some of the causes that qualify as covered incidents may include the following circumstances:
- Short circuits
- Mechanical failures
- Burned out motors
- Power surges
Your local insurance agent is the best resource to help you determine your risks and offer specifics on your coverage.
What is Not Covered?
This insurance coverage offers you protection against unexpected specific incidents. It excludes common maintenance-related failures or usual wear-and-tear of your equipment. You cannot use it to replace old equipment or make repairs stemming from poor maintenance.
Protection Against Lost Business Income
To minimize the risk of an equipment breakdown crippling your business for hours (or days!), ensure that your policy also protects you against lost business income. This type of coverage helps you defray the lost revenue and offsets the extra expenses incurred as a result of the loss of functionality of these systems.
Some policies will even allow you to add on “rush repair” coverage to minimize your downtime. These coverages can vary from state to state, so be sure to ask your agent about this possibility.
How Equipment Breakdown Insurance All Comes Together
Let’s take a look at how equipment breakdown coverage can all come together to offer you the protection you need during an equipment failure.
Pretend you own a doughnut shop, and the digital thermostat of your fryer was zapped in a power surge, rendering it inoperable. You probably have more significant concerns on top of getting a fryer fixed and the oil sizzling again. You just now realized that you also have dough prepped for the day that will go bad if not used up quickly, resulting in additional lost money.
And that’s still not your primary concern. The heart of the issue is this: every minute you cannot serve fresh doughnuts to your customers results in lost dollars, and that deficit can add up rather quickly!
With the right coverages selected, our donut shop owner could use the Equipment Breakdown Insurance to cover the cost of a rush job fryer repair, the lost perishable dough that went into the trash, and the income lost during the time the doughnut fryer was inoperable.
Now, the oil is bubbling again, customers are dropping in for hot doughnuts and coffee, and the cash register is making a steady cha-ching. Everyone is happy.
Property Damage Liability
Some policies take Equipment Breakdown Coverage a step further and include Property Damage Liability. This protects you from liability if the breakdown of your equipment causes accidental damage to someone else.
Let’s use our doughnut shop example.
Pretend our doughnut shop is not in a fixed location; it’s located in a food truck. Using an unlikely but extreme example, what if the fryer didn’t quietly click off after the power surge. What it the oil bubbled over and caused the fryer to explode, and the stainless steel shrapnel damaged the trailer next to it—which belongs to another entrepreneur.
Property Damage Liability will cover that liability for you.
Final Thoughts on Equipment Breakdown Insurance Coverage
Equipment breakdown insurance coverage is an optional program. However, your business cannot operate without the necessary tools for the job! Dollar for dollar, equipment breakdown coverage offers you peace of mind that allows you to focus on growing your business.
Talk to your local agent for more information and details on coverage in your state.