What is equipment breakdown coverage for business owners?

Beyond just repair costs, a breakdown in your business machinery can interrupt operations and impact your business’ revenue. Equipment breakdown coverage, an optional add-on to commercial property insurance, could help cover costs if your essential business equipment – such as a freezer, HVAC system or a production machine – fails due to a covered event, such as a mechanical or electrical breakdown.

Jump ahead to learn:

• What is equipment breakdown coverage?
• Equipment breakdown coverage examples
• 3 benefits of equipment breakdown insurance
• How much does equipment breakdown coverage cost for a commercial property?
• What’s usually excluded from equipment breakdown coverage?
• How is business equipment breakdown insurance different from inland marine insurance?
• How ERGO NEXT helps protect small business owners from equipment breakdown

What is equipment breakdown coverage insurance?

Equipment breakdown coverage, sometimes called boiler and machinery insurance, may help cover costs if essential business equipment suddenly fails due to a mechanical or electrical breakdown. It usually applies to equipment businesses rely on every day — including:

• Computer equipment
• Refrigerators, freezers and commercial ovens
• HVAC systems like air conditioners and heaters
• Boiler systems
• Elevators
• POS systems
• Security systems
• Electrical panels

Most of the time, equipment breakdown coverage is available as an add-on (endorsement) to a commercial property insurance policy. Unlike standard business property insurance, which can help cover damage from external events such as fire or theft, equipment breakdown coverage focuses on internal failures such as motor burnout, short circuits or power surges.

This type of business insurance coverage could also help cover lost business income if an equipment breakdown temporarily halts your business operations.

It’s important to review your commercial property policy carefully to understand whether breakdown coverage is included or if it needs to be added.

Watch a quick overview of commercial equipment breakdown coverage to learn more:

Equipment breakdown coverage examples

Imagine your restaurant’s commercial oven breaking down during Saturday night dinner service. You can’t cook, and you also risk losing customers and damaging your reputation.**

Here’s another scenario: Your manufacturing facility’s HVAC system conks out in the middle of summer, making it uncomfortable or unsafe for employees. You send everyone home until it’s repaired – but production comes to a stop.

These are just a couple of examples of how equipment breakdowns can disrupt your business operations. Insurance for equipment failures could help in the event of:

• Mechanical breakdown
• Electrical breakdown
• Power surges
• Motor burnout
• Short circuits
• Pressure vessel failure (on things like boilers or tanks)

That’s why it can be valuable protection for any business that depends on equipment to generate revenue, including industries like:

• Manufacturing
• Restaurants, caterers and food service
• Landlords and property managers
• Retail and grocery stores
• Healthcare
• Call centers

3 benefits of equipment breakdown insurance

Equipment breakdown coverage offers several advantages for small business owners.

1. Financial protection. It can help cover costs of broken equipment.
2. Income protection. The coverage can help provide compensation for lost income due to equipment breakdowns.
3. Business continuity. The insurance can help support smoother operations by minimizing disruptions caused by equipment failures.

By safeguarding your equipment, you can avoid hefty expenses associated with breakdowns. 

How much does equipment breakdown coverage cost for a commercial property?

The cost of equipment breakdown coverage can vary depending on several factors, including:

• The size of your business. Larger businesses with more equipment to protect will typically pay a higher premium than smaller businesses with less gear.
• The industry you’re in. Businesses in higher-risk industries, such as manufacturing or food service, might face bigger costs than an office with air conditioning.
• The value of your business equipment. The total value of your covered equipment can be a significant factor.
• Coverage limits. Higher coverage limits generally result in higher premiums.
• The deductible you choose. A higher deductible may reduce premium costs.

While cost for your policy matters, an unexpected breakdown could end up costing more.

To see exactly what you’d pay for coverage on your business equipment in about 10 minutes, start a free, no-obligation quote.

What’s usually excluded from equipment breakdown coverage?

Equipment breakdown insurance is valuable, but it has limitations on what it tends to cover. Here are some common exclusions:

• Wear and tear. Normal wear and gradual deterioration aren’t usually covered.
• Neglect or abuse. Damage caused by improper care or intentional misuse is usually excluded.
• Natural disasters. Separate policies usually cover events like damage from wind, rain or snow.
• Pre-existing conditions. Issues present before the policy start date might not be covered.

Review your policy carefully to understand its specific exclusions. This will help you assess your coverage needs and avoid surprises.

How is business equipment breakdown insurance different from inland marine insurance?

Both types of business insurance policies can help protect your business equipment — but solve very different problems.

• Equipment breakdown coverage focuses on internal mechanical or electrical failure.
• Tool and equipment insurance (also called Inland marine insurance) usually focuses on business gear in transit on the way to a job site and off-site risks.

Some businesses — especially contractors or cleaners — may benefit from both types of protection over their essential business gear, tools and equipment.

How ERGO NEXT helps protect small business owners from equipment breakdown

ERGO NEXT makes it fast, easy and affordable to protect your small business — and you can do it all online.

We’ll ask a few questions about your business and give you a quote. You can select your coverage options and buy your policy in about 10 minutes. Share your certificate of insurance at no extra cost, and you can access your policy 24/7 via web or mobile app.

If you have questions, our licensed, U.S.-based insurance professionals are available to help.

Start a free quote with ERGO NEXT.