Equipment breakdowns are more than just inconvenient; they can bring your business operations to a standstill and lead to significant financial losses. For manufacturers, whose daily operations depend on the seamless function of specialized machinery, understanding and managing the risks associated with equipment breakdowns is essential. Yet, many businesses are unaware of the insurance coverage options or the full benefits these policies can provide.
We explore what manufacturers need to know about equipment breakdowns, what to expect from your insurance company, and what to look for in coverage to ensure your operations stay on track.
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What Is Equipment Breakdown Insurance And What Is Covered?
Equipment Breakdown Insurance is a policy designed to protect against equipment failures and damaged or destroyed equipment. Items such as boilers, computers, phones, HVAC, motors, refrigerators, production equipment, and more are typically included in these policies.
Having this type of insurance on covered items often includes:
• Repair or Replacement Costs: Covers the expense of fixing or replacing damaged machinery.
• Business Interruption Coverage: Reimburses for lost income while operations are halted.
• Spoilage Coverage: Protects against the loss of perishable goods due to equipment failure.
• Extra Expenses: Covers costs incurred to minimize downtime, such as renting replacement equipment or expediting repairs.
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What Isn’t Covered by Equipment Breakdown Insurance?
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Typically, normal wear and tear is not covered. Additionally, breakdowns caused by operator error may be excluded unless specific coverage applies.
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For computer-related disruptions, damage caused by malware, cyber-attacks, and data breaches is typically excluded. However, some policies offer limited restoration coverage for system failures caused by power surges or mechanical malfunctions.
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Businesses should invest in cyber insurance for full protection against cyber risks, data theft, and hacking-related disruptions. If you’re unsure whether your policy covers these risks, review your coverage with your broker.
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Am I Covered For Equipment Breakdowns & Tips?
Knowing if you are covered can be as simple as asking your insurance agent or broker. Many businesses have complex coverage needs, so using an insurance broker who can assess your needs and shop policies is a great tip for any business. It takes the stress off you to determine what coverage you need, how much, and verifying you have the right options in place.
What you are looking for in your policy are any declarations or sections about equipment breakdowns or equipment coverage. If you have a simple coverage package, your equipment may only be covered for events like destruction or natural disasters, but not for unexpected breakdowns. Lacking this coverage means any downtime, backups, or delays due to equipment failure are at your expense. If vendors depend on your business and you cannot deliver due to breakdowns, you could also be liable for their losses.
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What to Expect from Your Insurance Company Or Broker:
When selecting an insurance provider, manufacturers should review multiple carriers to see if they cover or offer:
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Comprehensive Coverage: Does the policy cover multiple areas of your business like operational (Business Owners Insurance, Auto, Directors & Liability, Commercial Property, etc.)?
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Expert Guidance: Insurance representatives should provide insights into the unique risks your business faces and find policies that fit your needs.
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Claims Support: Does your agent offer prompt and effective claims processing to get operations back online quickly? Your insurance broker may also provide this service as an added value at no charge to you.
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Loss Prevention Resources: Many insurers & brokers offer risk management services, including maintenance recommendations and inspections, to help prevent breakdowns.
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Discounts for Preventative Maintenance: Some carriers offer better policy terms or reduced rates for businesses that follow routine equipment maintenance programs or use IoT technology to monitor equipment health.
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How to Evaluate Your Coverage:
To ensure your business is fully protected, consider these questions:
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Is all critical equipment covered? Review your policy to confirm all machinery, including HVAC systems, electrical panels, and production equipment, is included.
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Does your policy include business interruption coverage? Lost revenue can sometimes exceed the cost of repairs.
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What is excluded? Understand any limitations or exclusions, such as coverage for wear and tear.
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Are additional endorsements needed? Some policies may require add-ons for specific risks like power surges, spoilage, or operator errors. Ask if these are included or need to be added.
See If You Are Covered Today – Get Your Free Review
Don’t wait until a breakdown happens to discover gaps in your coverage or when it costs you money. At Bickle Insurance, we specialize in helping manufacturers safeguard their operations with tailored risk management solutions.
Contact us today for a free review of your current coverage to ensure you are protected against costly equipment breakdowns.
