Equipment Breakdown insurance today is an important part of any type of sound business insurance package. There are many reasons for this, including: new technology with fragile electronic and computerized equipment that is subject to breakdowns which can be more frequent and costly than traditional mechanical equipment; “just in time” inventory which makes all businesses more dependent than ever on computer systems; and critical business information that often only exists on the Internet, or in online databases, that cannot be accessed during periods of equipment breakdown.
Equipment Breakdown coverage steps in to pay for losses to covered equipment as a result of mechanical breakdown, short circuits/electrical arcing, power surges, motor burnout and operator error. Covered equipment can include mechanical equipment, much of which is computer-generated; electrical distribution systems; and heating and cooling systems. Electrical systems, in fact, represent up to 15% of a building’s value today.
Insureds will be covered for the cost of repairing and replacing the damaged equipment, and frequently (but not always) will also be covered for "business interruption" and "service interruption" coverage, which will cover the insured against loss of business or income due to computer-related "downtime." If, for example, a small business has its website maintained by an independent Internet Service Provider (ISP), the client should ensure that the ISP has both property/casualty and Equipment Breakdown coverage. The business should also ensure that its own Equipment Breakdown policy includes "service interruption" coverage, which will pay for the loss of business caused by a mechanical or electrical breakdown to the ISP’s servers or other equipment.
Even if some of the insured’s equipment is already covered by the manufacturer's warranties, warranties typically exclude things like operator error, which are typically covered by an Equipment Breakdown policy. Additionally, the carrier may provide inspections of insured equipment to help reduce the frequency and severity of an accident. The insurance company inspector looks at not only the condition of equipment in service, but also at such factors as plant maintenance philosophy, operator training, production flow and exposure to business interruption. During the physical inspection, he may be able to detect dangerous conditions before potential trouble. The inspector will oversee the testing of controls and safety devices, check equipment maintenance and review operators’ “logs,” for example. Also, an inspector may be able to offer suggestions that can help reduce operating costs or lengthen the usable life of equipment.
RPS offers Equipment Breakdown coverage, which is available for instantaneous quotes on our RPS eCommerce platform. Brokers can complete a short and simple application engineered to generate quotes without underwriter review. You are then able to instantly download quotes from top-rated carriers and bind coverage.