Equipment Breakdown Insurance

Published On: November 17, 2022By Categories: Business Management, Drilling, Insurance Corner

This coverage is for companies suffering unexpected damage.

Companies need safe and working equipment to operate efficiently and generate revenue. In fact, some businesses rely exclusively on a few pieces of equipment to run their entire operation.

Following a breakdown, major losses can occur, and many companies turn to equipment breakdown insurance (sometimes referred to as boiler and machinery insurance).

Equipment breakdown coverage is a form of property insurance designed to protect a company’s mechanical, electrical, and computer equipment from unexpected breakdowns. These policies are flexible and help organizations recoup financial losses related to and resulting from property damage, business interruption, and spoilage.

Read on to see examples of this type of coverage in action.

Claims Scenario: Out of Circuit

The company: A manufacturer of drilling parts and tools

The challenge: Equipment failure is a broad risk—one that can affect companies 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.

Take the example of a power surge caused by a major storm that destroyed two circuit boards at a manufacturer of a variety of drilling parts and tools. This unexpected outage left the business without the necessary machinery to continue operations.

Furthermore, to meet production deadlines, shopworkers had to travel to the company’s sister location. Between the lost time, travel expenses, and repair costs, the business experienced $52,000 in losses—all from just the one storm.

Equipment breakdown insurance in action: Equipment outages and breakdowns are not generally covered under standard commercial insurance policies. Instead, businesses 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.

Claims Scenario: In the Cold

The company: An independent testing laboratory

The challenge: A small testing lab experienced major losses after several of their refrigerators stopped working. The laboratory depended on these appliances to keep client samples at a constant, consistent temperature.

After several attempts to fix the system, the lab had to close for the day and call for repair services. Not only did the lab have to pay more than $1000 in maintenance costs, it also lost jobs totaling more than $15,000 worth of business from clients who elected to take their business elsewhere—a major hit for a small company.

Benefits of Equipment Breakdown Insurance
Repair cost coverage: Following an equipment breakdown, companies may have to pay thousands of dollars just to get their business up and running again. Equipment breakdown insurance can help soften the blow, reimbursing organizations for the cost to repair or replace damaged equipment due to an accident.

Expediting expenses: Repairing complex equipment in a hurry can be an expensive endeavor. Most equipment breakdown insurance policies cover any expenses needed to speed up the repair or replacement of damaged property, including the cost of temporary repairs.

Protection against business interruptions: Virtually in all cases, an equipment failure disrupts a business. In some instances, these disruptions are quantifiable, leading to lost revenue and productivity. Equipment breakdown insurance covers some of these costs, including income lost as a result of a covered accident.

What’s more, this protection is in effect until the equipment is repaired or replaced.

Equipment breakdown insurance in action: Just one equipment failure can lead to multiple losses, including lost revenue from business interruptions and lost product or customers. Thankfully, equipment breakdown insurance can protect against these risks.

In fact, equipment breakdown insurance is one of the few ways some companies, especially restaurants and other food-related businesses, can recoup losses from negatively impacted or spoiled inventory.

As such, companies need to secure the right policy to ensure their business is protected, not only after an equipment breakdown—but before and during.

Learn More About Equipment Breakdown Insurance

Consult your local insurance company to learn more about equipment breakdown insurance to combat costly, and often unpredictable, problems at your place of business.


This column is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Go to the NGWA webpage at to find out more information about companies it has partnered with.

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