Many Businesses have Some Equipment Breakdown Exposure
Could an equipment breakdown destroy your business?
Equipment Breakdown Coverage was originally created for businesses with large boilers, systems, and machinery required for operations and manufacturing. These days, nearly every business has some kind of equipment breakdown exposure. Mechanical breakdown and electrical damage are common occurrences, and can lead to severe interruptions in business. Many businesses have maintenance programs, equipment warranties, and service contracts, all of which can be a good back-up plan, but are not the best recovery method after a major loss.
There are various causes of equipment breakdown, such as:
- Improper repairs
- Supply line surges
- Excessive moisture
- Insulation deterioration
- Poor connections
- Overload conditions
- Lubrication failure
- Foreign material affecting windings and electrical circuits
A standard business property policy excludes coverage for mechanical breakdown, artificially generated electrical currents, and explosions. An Equipment Breakdown Policy is designed to fill in these coverage gaps.
Fragile electronic and digitized equipment can short circuit, causing severe loss of valuable technology and data. Businesses fail every day due to uncovered information systems failure. Business operations are commonly becoming more automated,
and automation technology is extremely expensive. Most businesses rely on computerized equipment to conduct transactions, maintain inventory, and deliver products or services. A failure in one of these critical systems could lead to eventual business failure not just for your company, but also others that rely on your business' operation. In the manufacturing industry, businesses are often integrated to co-produce a final product. Equipment breakdown can lead to millions of dollars in lost income, the financial ruin of several businesses, and an unrecoverable loss of goodwill. Businesses that use Point Of Sale (POS) systems to process transactions can lose hundreds of thousands in lost income if a satellite or communications line is damaged. Businesses that rely on refrigeration, utility lines, or portable machinery are all exposed to systems failure. Can you think of an equipment breakdown that would harm your business?
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Equipment Breakdown Coverage will pay to repair or replace damaged equipment due to a covered loss. In many cases, the policy will also pay for the business interruption, or loss of income to your business as a result of an equipment breakdown loss. Insurance companies will also often pay for necessary expenses to help expedite a business’ restoration. Policies can include coverage for extra expenses during the restoration period that are over and above the normal costs to your business, such as increased rent at a temporary location and the costs necessary to relocate and expedite delivery of products and services. Whereas, a property loss will often be subject to a $500 or $1000 deductible; business interruption losses have time deductibles, such as 24, 48 or 72 hours.
Regardless of the nature of your business, you can likely imagine a scenario where Equipment Breakdown could directly or indirectly affect your business. Our commercial lines coverage specialists are prepared to meet with you and discuss how to mitigate these losses by customizing an Equipment Breakdown policy for your business.