No business can function without its essential equipment. Whether it's industrial machinery, refrigeration units, or computer systems, your operations depend on these tools running smoothly. But what happens when they suddenly fail?
These breakdowns lead to expensive repairs and can cause operational downtime, lost revenue, and even damaged inventory. In fact, critical equipment failure is one of the most worrying risks for businesses. According to a survey by FM Global (2019), 9 in 10 business leaders of Fortune 500-size companies listed it as a major concern.
Most businesses assume their commercial property insurance will cover these losses, but standard policies don’t protect against internal mechanical or electrical failures. That’s where Equipment Breakdown Coverage fills the gap.
In this post, we’ll break down what Equipment Breakdown Coverage is, what it covers (and doesn’t cover), how much it costs, and real-world examples of how it can save businesses from costly disruptions.
What is Equipment Breakdown Coverage?
Equipment breakdown coverage is a type of business insurance that protects you from financial losses when essential equipment suddenly stops working due to mechanical, electrical, or operational failures.
It covers the cost of repairing or replacing damaged equipment and can also help recover lost income caused by business interruptions.
Unlike commercial property insurance, which covers damage from external events like fires or storms, equipment breakdown coverage protects explicitly against internal failures—such as power surges, motor burnout, or pressure system failures.
For businesses that rely on specialized equipment, this coverage helps reduce financial risks and ensures operations can resume quickly after a breakdown.
Equipment Breakdown Coverage Examples
Here are some real-world examples of how equipment breakdown insurance helps businesses recover from costly repairs and downtime:
- Manufacturing equipment failure: A critical machine in a production line malfunctions due to a motor burnout. Equipment breakdown insurance covers repair costs and lost income while the machine is fixed.
- Power surge damage: A power surge fries a company’s computer network and telephone system, making it impossible to process orders. The policy covers replacement costs for damaged equipment.
- Refrigeration breakdown: A restaurant’s refrigeration system fails overnight, causing food spoilage and inventory loss. Equipment breakdown insurance reimburses the restaurant for lost inventory and repair costs.
- Boiler malfunction: During peak season, a hotel’s boiler system breaks down, affecting guest comfort. The policy covers the cost of repairs and temporary heating solutions to keep operations running.
Types of Equipment Covered Under Equipment Breakdown Insurance
Equipment breakdown insurance covers a wide range of essential business equipment that can fail due to mechanical or electrical issues. Here’s a breakdown of the key equipment covered:
- Electrical systems: Covers damage to wiring, circuit breakers, transformers, and electrical panels due to power surges or short circuits.
- Heating, ventilation, and air conditioning (HVAC) systems: Protects against failures in heating and cooling units that can disrupt business operations.
- Refrigeration units: Covers walk-in coolers, freezers, and other temperature-controlled storage systems crucial for food service and medical industries.
- Production and manufacturing equipment: This includes machinery used in factories, assembly lines, and processing plants, which is vital for daily operations.
- Computer and communication systems: Covers business computers, servers, phone systems, and data centers damaged by electrical failures or surges.
- Point-of-sale (POS) systems: Protects cash registers, card readers, and payment terminals essential for retail and hospitality businesses.
- Security and alarm systems: These include surveillance cameras, electronic locks, and fire detection systems that fail due to mechanical issues.
- Boilers and pressure vessels: Covers steam boilers, pressure tanks, and industrial heating systems that experience sudden breakdowns.
- Water heaters and pumps: Provides coverage for essential plumbing equipment that fails unexpectedly.
What Does Equipment Breakdown Insurance Cover?
Equipment breakdown insurance helps businesses avoid costly disruptions and financial setbacks by ensuring critical equipment can be repaired or replaced quickly. The coverage typically includes:
- Repair or replacement of damaged equipment: Covers the cost to fix or replace mechanical, electrical, or electronic equipment that breaks down unexpectedly.
- Loss of business income: Helps recover lost revenue if a breakdown forces your business to shut down temporarily.
- Extra expenses: Pays for temporary solutions, such as renting replacement equipment or moving operations to a new location while repairs are underway.
- Spoilage of perishable goods: Covers food, medicine, or other perishable inventory lost due to refrigeration or cooling system failures.
- Damage caused by power surges: Protects against electrical damage to computers, data centers, and production equipment caused by sudden voltage spikes.
- Boiler and pressure system failures: Covers repair costs for steam boilers, pressure vessels, and similar industrial systems that fail due to mechanical or pressure-related issues.
- Operator error: Provides coverage of an accidental mistake, like improper machine operation, leads to equipment failure.
What is Not Covered by Equipment Breakdown Insurance?
While equipment breakdown insurance protects businesses from sudden and unexpected failures, it doesn’t cover every type of damage or loss. Understanding these exclusions can help you identify gaps in your coverage and take additional precautions.
Here’s what equipment breakdown insurance does not cover:
- Wear and tear: Damage from regular use, aging, or lack of maintenance isn’t covered. If a machine breaks down due to old parts or poor upkeep, the repair costs fall on you.
- Intentional damage: If an employee or business owner deliberately damages equipment, insurance won’t cover the repairs.
- Software failures: Equipment breakdown insurance covers physical damage to hardware but not software crashes, viruses, or data loss. Businesses need cyber liability insurance to protect against these risks.
- External disasters: Fires, floods, earthquakes, and storms that damage equipment are covered under commercial property insurance.
- Normal business interruptions: If operations slow down due to non-equipment-related reasons (such as supplier delays or staffing shortages), this insurance won’t compensate for lost revenue.
- Product recalls: If faulty equipment leads to defective products, the cost of recalling and replacing them is not covered.
- Food spoilage: Many policies don’t cover perishable inventory loss from equipment failure unless you purchase additional coverage.
- Utility-supplied failures: If a power outage or gas supply disruption originates off-premises (like at the utility company), the damage to your equipment may not be covered.
To fully protect your business, it’s important to combine equipment breakdown insurance with other policies, such as commercial property insurance and cyber liability insurance. This ensures you’re covered from both internal failures and external risks.
That’s where TWFG Khan Insurance steps in. We help businesses identify and fill coverage gaps by tailoring insurance plans to their specific needs.
Whether you need commercial property insurance for external disasters, cyber liability insurance for software risks, or additional coverage for food spoilage and business interruptions, we ensure your business stays protected from all angles.
How Much Does Equipment Breakdown Insurance Cost?
For small to mid-sized businesses, equipment breakdown insurance is often bundled with a Business Owner’s Policy (BOP) or commercial property insurance, making coverage more affordable.
- Small businesses: Typically pay between $300 to $2,500 per year, depending on industry and equipment value.
- Larger businesses: Costs can range from $5,000 to $50,000+ annually, especially for businesses with heavy industrial equipment.
Here are the key factors that influence the cost:
- Type and value of equipment: High-value or specialized equipment costs more to insure due to higher repair and replacement expenses.
- Business size and industry: Larger businesses with complex machinery, like manufacturers or healthcare facilities, may have higher premiums than small offices.
- Claims history: If your business has filed multiple claims in the past, insurers may increase premiums due to perceived risk.
- Policy limits and deductibles: Higher coverage limits offer greater protection but also raise premium costs. Choosing a higher deductible can lower your monthly premium.
- Location: Businesses in areas prone to frequent power surges or extreme weather conditions may face higher costs.
How to Manage Costs:
To keep premiums affordable:
- Regularly maintain equipment to reduce the risk of breakdowns.
- Bundle equipment breakdown insurance with other policies to get discounts.
- Work with an insurance expert like TWFG Khan Insurance to tailor coverage to your exact needs.
Understanding the cost of equipment breakdown insurance is essential, but finding the right balance between affordability and comprehensive protection can be challenging. That’s where TWFG Khan Insurance comes in.
We specialize in tailored equipment breakdown insurance that aligns with your business needs and budget. Whether you run a small office, a manufacturing plant, or a high-tech facility, we help you get coverage that protects your critical equipment without unnecessary costs.
Protect Unexpected Equipment Failures with TWFG Khan Insurance
Unexpected equipment failures can lead to costly repairs, lost revenue, and operational downtime. At TWFG Khan Insurance, we understand these challenges and provide comprehensive equipment breakdown coverage tailored to your business needs.
With TWFG Khan Insurance, you get:
- Custom Coverage for Your Industry: Whether you run a manufacturing facility, a construction business, a restaurant, or a data center, our policies are designed to cover industry-specific equipment breakdown risks.
- Expert guidance: With years of experience, we help businesses navigate risks and choose the right level of protection.
- Fast & Reliable Claims Support: Equipment failures demand quick solutions. Our dedicated claims team ensures that your business gets back to full capacity as soon as possible.
- Affordable & Scalable Plans: We offer cost-effective solutions that fit your budget and grow with your business. Our experts will help you determine the right coverage limits for your needs
Don’t leave your business vulnerable to unexpected equipment failures. Get a quote with us today and secure the protection you need to keep your operations running smoothly.
