What Is Equipment Breakdown Insurance?

by Neal Litherland - Updated September 26, 2017
Businessman checking a machine in a factory

Car insurance, home insurance and even health insurance are all what you purchase "just in case" something bad happens. Businesses, especially manufacturing businesses, tend to purchase equipment breakdown insurance. This sort of policy helps to protect the business from costs and losses that occur when important machinery just stops working.

Definition

Equipment breakdown insurance is just what the name implies: insurance that covers the financial costs that come up when equipment breaks and stops working. For many businesses, certain pieces of equipment are essential to daily operations. Whether it's a meat packing plant that needs a working refrigeration unit or a construction site that absolutely has to have its crane in working order, these and many other pieces of equipment can be covered by breakdown insurance.

Damages

Equipment breakdown insurance, generally speaking, covers almost any sort of damage that leads to the equipment which is insured not working. It can be a bulldozer that throws a piston and the engine fuses, or it gets so cold that the water tank in a boiler that was turned off cracks open. If the equipment broke down, the insurance kicks in. These policies tend to cover mechanical damage, machine malfunction, electrical hazards, power surges and a variety of other causes that lead to equipment breakdown.

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Uses

Equipment breakdown insurance is useful for more than just construction companies and manufacturing businesses. Landlords could take out equipment breakdown insurance on the boilers in the houses they rent, for instance, and then if that piece of equipment stopped working the insurance would kick in.

Costs Covered

Equipment breakdown insurance can cover a number of different things. The costs associated with the equipment repair and/or replacement are top on the list, but there are other costs the insurance can cover as well. Loss of income due to the equipment being broken may also be covered by this insurance policy.

Vs. Property Insurance

While many businesses and even private citizens have property insurance, it isn't the same as equipment breakdown insurance. Property insurance generally refers to the building and items connected directly to the physical land. Computers blown up in power surges or forklifts that stop working while on the property are usually not covered. Equipment breakdown insurance is concerned specifically with the equipment that a company uses on its property, rather than the property itself.

About the Author

Neal Litherland is an author, blogger and occasional ghostwriter. His experience includes comics, role playing games and a variety of other projects as well. He holds a bachelor's degree in criminal justice from Indiana University, and resides in Northwest Indiana.

Photo Credits

  • Jack Hollingsworth/Photodisc/Getty Images
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