NYC Insurance Blog

What is The Difference Between Equipment Insurance & Equipment Breakdown Insurance?

Business owners must understand that their standard commercial insurance policies do not automatically cover the breakdown or loss of their crucial tools or equipment! Although some policies and insurers might include coverage for the tools and equipment to an extent, the coverage is non-sufficient if used daily, for example, in the construction industry. In such cases, you must purchase separate coverage options, i.e., equipment or equipment breakdown insurance.

What is Equipment Breakdown Coverage?

This type of coverage protects your tools and equipment, for example, production machinery, computers, and electrical systems, from sudden & accidental malfunctions. It is important to understand that this policy is a part of your commercial property insurance which you can either purchase as a stand-alone or as a Business Owner’s Policy (BOP). Here are some of the things the policy can cover:

• Electrical systems
• Computer systems
• Appliances
• Mechanical systems

What’s the Difference Between Equipment Insurance & Equipment Breakdown Insurance?

Typically, commercial property insurance protects the building you operate your business and the contents inside, i.e., your equipment. Ergo, with this type of policy, you can protect items in your building, including your tools, inventory, and furniture. Other times, the policy can protect items outside the building, such as fencing, landscaping, and outdoor signs. Commercial property insurance usually covers equipment if it is damaged by external events like fire outbreak, theft, and vandalism.

Unfortunately, the policy cannot cover damage caused by common problems like accidental breakdowns, especially those caused by internal problems or sources. To cover such losses, you need equipment breakdown insurance.

Equipment Breakdown Insurance

This is a form of additional coverage besides commercial property insurance that covers your equipment against accidental/sudden breakdowns. It also covers physical equipment damage if it requires repairs or replacement. Remember, the policy does not cover usual wear and tear. For example, equipment breakdown insurance will cover the loss incurred if your tools or equipment needs repair or replacement because of an internal problem. Here are some of the issues covered by the policy:

• Mechanical or electrical breakdown
• Explosion damage caused by pressure vessels
• Explosion damage caused by boilers and piping systems
• Operator error
• Electrical shorts
• Motor burnout
• Power surges

Remember, you can have some coverage if you have a warranty. However, warranties have numerous limits and conditions, and if you violate one, you do not qualify.

Equipment Insurance

The policy covers external damages from events like fire, windstorms, vandalism, and theft. Luckily, the policy also covers damages when the equipment is in transit, e.g., to work sites.

Equipment insurance can also be referred to as an equipment floater and can be provided as scheduled or blanket coverage.

With blanket coverage, you must determine the tools and equipment you define as property to get coverage

In a nutshell, equipment insurance protects against damages resulting from external causes, while equipment breakdown coverage protects against any risks of damages resulting from internal sources.

Who Should Invest in Equipment Breakdown and Equipment Insurance Policies?

If your business uses tools and equipment daily, you need these policies. Here is a list of businesses that should consider investing in equipment breakdown & equipment insurance policies:

• Technicians
• Electricians
• Manufacturers
• Warehouses
• Landscapers
• Photographers
• Plumbers
• Construction companies
• Welder
• Autobody contractors
• HVAC contractors
• Bakeries
• Restaurants
• Property owners
• Hospitals
• Schools
• Tech companies
• Churches
• Retailers
• Local governments
• Convenience stores
• Hotels

What is Excluded in Equipment Breakdown & Equipment Insurance Cover?

Just like any other insurance policy, there are several exclusions. For example, equipment insurance does not include equipment not included in the coverage list (applies in scheduled and blanket options). Also, the policy does not cover pest damage, nuclear hazards, mold, and rust damage.

On the other hand, equipment breakdown insurance cannot cover external damages caused when your equipment is in transit. Remember, the policy only covers losses resulting from internal damages. Also, don’t expect coverage if the damages/losses result from poor maintenance, tire issues, or poor routine tune-ups.

Business owners should also understand that insurance companies do not cover losses or damages from poor installations. If you need such protection, consider investing in an additional installer floater. This policy covers personal property/equipment during installation, transit, and when a qualified professional changes it. 

Final Thoughts

Typically, equipment breakdown insurance costs about $800 per annum. However, the type of equipment insured, the size of the business, the location, and the type of policy you purchase (stand-alone of BOP) can determine the cost. Your insurance agent can help you choose the policy that will provide sufficient coverage at a pocket-friendly price. Allow us to help find you the right coverage for your Equipment and business.

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