Protect Your Business With Machinery & Equipment Insurance

If your business uses mechanical, electrical or pressurized equipment, you need more than a property insurance policy to remain in operation.

Because you work hard to ensure the success of your business, it makes sense to prepare for unexpected equipment breakdowns. Practically, every business relies on equipment. Regardless of how simple or complex, your equipment is critical to your business’ successful operation.

For example, while an electrical panel is a very basic piece of equipment, imagine trying to operate your business without electricity. Machinery and equipment insurance gives you financial resources to help you restore your business to full operation after an unforeseen equipment failure beyond your property insurance policy.

Property Insurance Exclusions Impacting Machinery & Equipment

An important distinction to note in your property insurance policy is that standard property policies do not cover machinery and equipment losses. The addition of M&E coverage – also called equipment breakdown coverage – protects equipment such as transformers, electric panels, motors, air conditioning units, refrigeration units, production machinery and boilers from losses caused by:

• Mechanical breakdown
• Electric arcing or power surges
• Explosion of steam boilers, piping, engines and turbines
• Loss or damage to steam boilers
• Loss or damage to hot-water boilers
• Indirect losses associated with the above causes

How Does Machinery & Equipment Insurance Work?

Your EBC will provide broad, comprehensive coverage protecting your business from a wide range of equipment failures including production machinery. EBC adds mechanical breakdown, electrical breakdown and steam boiler explosion as covered causes of loss, protecting your business from business-interruption losses as well as direct damage losses caused by an accidental failure to a vital piece of equipment.

M&E coverage reimburses you for expenses related to repairing or replacing covered equipment damaged by an accident or breakdown. This is a sudden and accidental breakdown of the equipment (or a part of the equipment), manifested at the time of the breakdown by physical damage requiring a repair or replacement. Normal in-service deterioration and losses caused by corrosion or erosion are not considered to be a breakdown.

Often, equipment breakdown losses do not stop with the repair bill. Consider the possibility of significant business interruption and consequential losses as well as extra expenses you may incur to keep your business running after a covered loss.

Accidents Happen, Machinery & Equipment Insurance Can Help

For example, M&E insurance paid for these loss scenarios:

• The shaft on a city water pump broke after a momentary power interruption. Repairs took a week and cost more than $45,000.
• A nursing home’s emergency generator was damaged when the city lost electric power for two seconds. A rental generator was installed during the repairs. The repairs and rental charges totaled more than $111,000.
• A church’s heating boiler experienced a low-water condition. A rental boiler was used until a new boiler was installed. The rental and the new boiler cost more than $60,000.
• An air conditioning system broke down, forcing a hotel to close. The business income loss was more than $90,000.
• As a building tenant, you suffer a covered loss to your compressor used for pneumatic air supply. EBC pays – up to the limits specified in your policy – the necessary extra expense incurred to expedite the repair of the compressor in addition to paying for the repair itself.
• A large air-conditioning motor short circuits because of an electrical power surge, causing you to shut down your medical practice and cancel appointments until repairs are completed. In addition to paying the cost to repair the damaged motor, EBC covers loss of business income on appointments that could not be rescheduled.
• A high-pressure steam boiler explodes, causing extensive damage to your manufacturing line and building. EBC covers the damage to your equipment and your building.
• A gear in a production machine suddenly breaks, shutting down your production line. If you’ve purchased EBC for your production equipment, your policy pays up to the policy limit for your cost to repair or replace the damaged gear and your lost income or extra expense caused by the accident.

Is Your Business Protected?

Selecting an equipment breakdown coverage (EBC) option with your business property insurance policy protects you against financial loss from the sudden and accidental breakdown of machinery and equipment. You can include coverage for office equipment, heating and air conditioning systems, motors and electrical panels. By conveniently adding this coverage to your property policy, you eliminate the need for a separate policy to protect against these exposures.

Your independent agent can review your company’s equipment breakdown needs and help determine how best to adequately protect your business from equipment breakdown losses.

This loss control information is advisory only. The author assumes no responsibility for management or control of loss control activities. Not all exposures are identified in this article. Contact your local, independent insurance agent for coverage advice and policy service.