In the manufacturing industry, operational efficiency hinges on the reliability of equipment. A breakdown in machinery can disrupt production, leading to financial losses, missed deadlines, and strained relationships with customers. As manufacturing processes become more automated and reliant on advanced technology, the risk of equipment failure grows. Equipment breakdown insurance (also known as boiler and machinery insurance) is critical to mitigating these risks, covering the costs associated with unplanned downtime and damaged machinery.
Why are Breakdowns a Major Concern for Manufacturers?
Manufacturing equipment has evolved into complex, high-tech systems that are both powerful and delicate. This technological advancement introduces new risks:
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Sensitive Electronics: Modern manufacturing relies heavily on electronic components like sensors, controllers, and automated systems. These can be easily damaged by something as minor as static electricity or a power surge.
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Production Line Interruptions: Equipment failures can bring entire production lines to a halt, resulting in significant downtime. In industries where just-in-time manufacturing is standard, even minor delays can lead to cascading problems down the supply chain.
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Repair Challenges: Fixing advanced manufacturing equipment often requires specialized parts or technicians, extending the time it takes to get back to full production capacity.
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Supply Chain Impact: For manufacturers, equipment breakdowns can cause delays in meeting customer demands, leading to potential penalties, lost orders, and reputational damage.
Common Equipment Breakdowns in Manufacturing
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Electrical Systems: Electrical infrastructure is the backbone of most manufacturing operations. A short circuit in a transformer, electrical panel, or other components can cause major disruptions. Electrical failures may result in temporary shutdowns, costly repairs, or the need for backup power systems. For example, a short circuit in a major manufacturing plant’s electrical system could cause prolonged outages, leading to substantial losses in productivity and revenue.
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Industrial Machinery: Manufacturing equipment such as CNC machines, lathes, molding machines, and robotics are prone to breakdowns from wear and tear, improper maintenance, or operator error. Mechanical failures like metal fatigue, seizing, or misalignment can lead to production delays, while waiting for parts or specialized technicians can further compound the issue.
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HVAC Systems: Manufacturing plants often depend on large-scale HVAC systems to regulate temperature and humidity, which can be essential for product quality and worker safety. A breakdown in an industrial HVAC system can disrupt production, especially in temperature-sensitive processes such as food manufacturing or pharmaceutical production.
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Boilers and Pressure Vessels: Many manufacturing facilities rely on boilers or pressure vessels for heating, cooling, or powering specific processes. These systems can suffer from explosions, bulging, or collapsing, causing major damage and forcing a shutdown. For example, a boiler failure during peak production could result in significant repair costs and lost revenue due to halted operations.
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Computers and Control Systems: In modern manufacturing, computerized control systems manage everything from production schedules to machinery operations. Failures in these systems can cause widespread disruption. A power surge, for example, could damage programmable logic controllers (PLCs) or interrupt networked systems, bringing entire production processes to a halt.
Claims Scenario: Give Me a Break
The company: A metal cutting company.
The challenge: Equipment failure is a broad risk—one that can affect organizations of all kinds. What’s more, equipment failure isn’t always the result of a specific catastrophe, and many events that lead to a breakdown are out of a company’s control.
Recently, a power surge caused by a major storm destroyed two circuit boards at a metal cutting shop. This unexpected outage left the business without the necessary machinery to continue operations. Furthermore, in order to meet production deadlines, shop workers had to travel to the company’s sister location. Between the lost time, travel expenses and repair costs, the organization experienced $52,000 in losses—all from just one storm.
Equipment breakdown insurance in action: Equipment outages and breakdowns are not generally covered under standard commercial insurance policies. Instead, organizations should acquire comprehensive equipment breakdown insurance to cover the cost to repair or replace damaged equipment.
In addition, equipment breakdown insurance reimburses companies for lost time, which can prove invaluable following a sudden outage.
How Equipment Breakdown Insurance Protects Manufacturers
Equipment breakdown insurance is designed to address the specific risks manufacturers face. A comprehensive policy typically covers:
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Property Damage: Pays for the repair or replacement of equipment damaged due to an accident or malfunction.
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Business Income Loss: Compensates for lost revenue during downtime caused by a breakdown. This coverage also includes additional time to restore full production capacity after repairs.
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Contingent Business Income: Protects against income loss if a key supplier or customer experiences an equipment breakdown that disrupts your business.
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Extra Expense: Covers costs like renting replacement equipment, expediting repairs, or temporary facilities to minimize operational disruptions.
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Service Interruption: Covers business income losses and extra expenses due to breakdowns at a utility provider, such as power or water services, which are critical for maintaining manufacturing operations.
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Perishable Goods: For manufacturers handling sensitive or perishable products, this coverage compensates for losses due to spoilage from equipment failures, such as refrigeration breakdowns.
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Expediting Expense: Provides funds to expedite repairs or replacements to reduce downtime and get production back on track as quickly as possible.
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Hazardous Substances: Covers cleanup costs if hazardous materials are released during a breakdown, which can occur in facilities that handle chemicals or other dangerous materials.
What You Can Do To Keep Your Business Prepared:
In the fast-paced manufacturing industry, unexpected equipment breakdowns can result in substantial financial losses and operational disruptions. With equipment breakdown insurance, manufacturers can protect themselves from these risks, ensuring that they are covered for repair costs, lost income, and any additional expenses needed to keep operations running smoothly.
Bickle Insurance Services offers tailored solutions to safeguard your manufacturing business from costly and unforeseen equipment breakdowns. Contact us today to ensure your equipment—and your business—is fully protected.
