Equipment Breakdown Insurance: The Importance to You and Your Business

And the losses sustained continue to increase with the rise of just-in-time manufacturing, Internet marketing and improved supply chain management. Problems with your equipment can be extremely risky if you are not properly insured, as standard Property Insurance will not cover these types of losses. Equipment Breakdown Insurance (also referred to as Boiler and Machinery Insurance) will cover you in the event of damage or a breakdown.

Why Are Breakdowns a Problem?‍

Though technology provides a host of invaluable features, it also poses many risks. 

Circuitry on high-tech equipment is sensitive. A force as simple as static from bubble wrap can damage certain pieces of equipment.

• Breakdowns that lead to interruptions in telecommunications, email and
  e-commerce mean lost time and revenue.
• Interconnected but separate technologies can affect one another after a power surge or loss of functionality.
• Obtaining parts to fix complex equipment can be difficult and time consuming.
• Equipment may be located in areas of the facility that are difficult to reach, complicating repairs and concealing problems. 

What Are the Most Common Equipment Breakdowns?

Electrical Systems‍

Electrical systems make up 10 to 15 per cent of a building’s worth, and because they predicate all other business functions, a failure holds the potential for substantial loss for both building owners and their tenants.

A short circuit in a transformer, panel or cable can spread and destroy a large part of the system. These parts are often overlooked and underserviced. 

Costs such as generator rental fees, relocation of tenants and the cost of leasing property in another location until equipment is repaired can worsen the financial impact of a breakdown.  

For example, a 2008 incident of electrical arcing destroyed three main electrical panels and left an office building without power. Temporary measures were taken to restore power to tenants, contributing to a total loss of $1,507,389.

‍Air Conditioning and Refrigeration‍

Since many air conditioning units are located on the roof, repair or removal requires the hire of a helicopter or crane.

Without A/C, many businesses will need to relocate or rent temporary equipment while the unit is out of order.

Businesses that rely on refrigeration to maintain their products (hotels, restaurants, schools, nursing homes, hospitals, etc.) run the risk of spoilage in the event of a breakdown. They may be forced to hire a catering company or rent a refrigeration truck.

In one case, a hotel air conditioning compressor motor broke down during a July convention, causing $73,366 in total losses.

‍Boilers and Pressure Vessels

Cracking, collapsing, bulging or explosion can occur in boilers and pressure vessels (heating units, hot water units, cookers, sterilizers, cleaning equipment, etc.).

With no heat or hot water at a facility, businesses are forced to rent costly temporary units until the facility can be repaired.

For example, one store lost heat during the holiday shopping season when the boiler broke down and incurred $54,467 in losses.

‍Computers and Communication Equipment

Outages can affect computers, multi-line phone systems, TV satellite systems, point-of-sale systems, security systems and fire alarm systems.

An outage at your Internet Service Provider (ISP) can affect the functionality of your website and prevent your access to crucial information or Web services.

For example, a power surge damaged a service station/convenience store’s electronic cash register, auto diagnostic system, phone and paging equipment and security system for a total loss of $56,888.

‍Mechanical Systems

Can break down as a result of vibration, metal fatigue, seizing, misalignment or human error. This includes machines such as water pumps, ventilation fans, elevator and escalating machines, motors or engines.

Equipment is often critical to most buildings’ functions.

An example of this type of breakdown would be when a hydraulic lift in an auto repair shop needs to be replaced after welds gave way, costing around $9,000.

What Does Equipment Breakdown Insurance Cover?

It is important to understand the coverage you receive with your equipment breakdown policy. If you hold an older policy, you may want to review it with Reith & Associates Insurance and Financial Services Limited to be sure it covers any new, high-tech equipment you may have recently added to your operations. 

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