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What Is Equipment Breakdown Coverage?

Updated: December 2017

Equipment breakdown coverage is an optional part of a business insurance policy. It may help pay to repair or replace damaged or broken-down equipment after a covered incident. Equipment breakdown insurance may help cover equipment that's necessary to keep your business running, such as boilers and machinery, or even office air conditioning, computers and security systems.

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What Does Equipment Breakdown Insurance Cover?

Equipment breakdown insurance may help pay for:

  • Repairs after a covered incident
  • The extra cost of temporary repairs or rush repairs
  • Lost business income due to broken-down equipment
  • Property damage liability costs
  • Mandatory inspections of key equipment

Covered Incidents

Depending on your policy, covered incidents might include power surges, short circuits, mechanical breakdowns or motor burnouts. Coverage may also help pay to replace perishable goods such as spoiled food.

Temporary or Rush Repairs

The National Association of Insurance Commissioners (NAIC) notes that coverage may also help protect you against the cost of making temporary repairs to your equipment, or the extra cost of speeding up repairs. This can help to minimize the time a business may be forced to shut down as the result of an equipment breakdown.

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Lost Business Income

If critical equipment breaks down and you can't run your business normally, equipment breakdown coverage may provide for lost business income. The International Risk Management Institute notes that a claim for loss of business income has to be thoroughly documented.

As InsureU explains, if an equipment breakdown causes an interruption to your business, that interruption generally has to continue for a period of time before coverage for lost income kicks in.

Property Damage Liability

Equipment breakdown coverage may provide liability protection if a breakdown or accident causes damage to others, according to the NAIC. For example, if a piece of equipment explodes and damages someone else's property, equipment breakdown coverage may help protect you against liability costs to the owner of that property.

Mandatory Inspections

Coverage may include the cost of mandatory inspections of key equipment. A thorough inspection may help prevent problems before they arise.

To learn what specific protections your business' equipment breakdown coverage provides, read your policy carefully or ask your insurance agent.

What Might Not Be Covered?

Ordinary wear and tear on equipment is not typically covered by equipment breakdown insurance, says the Insurance Information Institute. If your equipment stops working because it’s badly maintained, or if it’s just old and needs to be replaced, your insurance probably won't cover that cost.

Finally, equipment breakdown coverage has a limit, which is the maximum amount your policy will pay for a covered claim. You are responsible for paying out of pocket costs that exceed your coverage limit.

If your business could suffer in the event of an equipment breakdown, this optional coverage may be a good choice. A business insurance agent can help you understand what your policy covers and whether your business may benefit from additional protections such as equipment breakdown coverage.

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This content is for informational purposes only and may not be applicable to all situations.

Coverage subject to terms, conditions, and availability. Policy issuance is subject to qualifications. Allstate Insurance Company, Allstate Indemnity Company, Allstate Fire and Casualty Insurance Company, Allstate Property and Casualty Insurance Company, Northbrook, IL. © 2017 Allstate Insurance Company, Northbrook, IL.

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