Streetsmart insurance Blog
Most jobs at least involve a piece of equipment—if not being entirely reliant on it. Similarly, there aren’t many businesses in the modern age that don’t rely heavily on equipment. Precisely what that equipment does varies a lot from job to job and company to company. For one self-employed contractor, the vital equipment might be a laptop. For another, it might be an air compressor used for home construction and improvement jobs. For one major business, it might be an entire computer and IT network. For another, it might be a trucking fleet.
In any case, most industries and businesses are indebted to machinery in one way or another. As the name suggests, equipment breakdown coverage is the type of insurance meant to protect businesses or contractors in a situation where their machinery fails them.
The Roots of Equipment Breakdown Coverage
Ever since the industrial revolution, businesses that rely heavily on machinery have been commonplace. However, equipment breakdown coverage itself doesn’t date back that far. Instead, what we know as equipment breakdown insurance today has a direct ancestor in a similar form of insurance: boiler and machinery insurance.
These two different names more or less refer to the same thing—to the point where some modern insurance companies even continue to offer boiler and machinery insurance. Essentially, the reason for the name change is that “equipment breakdown insurance” is just more general. The title of “boiler and machinery insurance” just sounds a bit old fashioned, and not like something that would apply to certain pieces of modern equipment—such as tablets or Wi-Fi networks. “Equipment breakdown insurance” is titled a bit more generically because there is so much equipment that modern businesses might need to insure.
How Equipment Breakdown Insurance Coverage Works
Businesses are so reliant on equipment and technology; there are plenty of scenarios in which an equipment breakdown could hamper business productivity and result in loss of profits. If a company’s entire computer network were to be infected by a virus, the IT department would have to take the time to solve the problem before most of the staff could return to work as usual. If a restaurant’s electricity went down, it would have to close its doors until they fixed the problem. If a piece of construction equipment broke down, the builders might be forced to halt the project until they could have the equipment serviced or replaced.
In all of these scenarios and many, many others, equipment breakdown insurance would provide relief. Here are a few of the expenses that equipment breakdown coverage would help to cover:
The cost of replacing broken equipment.
The cost of servicing damaged equipment.
The loss of business revenues caused by the equipment breakdown in question.
The cost of replacing materials damaged as a result of the equipment failure.
The costs of moving materials to prevent damage or any other expenses associated with mitigating the results of the initial equipment breakdown.
The first three bullet points would likely apply to any business faced with equipment failure. At a bare minimum, you would expect your equipment breakdown policy to cover repair or replacement of the equipment and lost revenues or wages. The last two bullet points would only affect some businesses. For instance, if a restaurant lost power, the insurance policy would likely extend to any ingredients or food materials in the cooler that spoiled as a result of the breakdown. Similarly, if the restaurant acted fast to purchase a generator or call in a refrigerated truck—either to keep the cooler running or to move the perishable items elsewhere—equipment breakdown insurance would likely cover the costs of those loss-mitigation actions.
The Increasing Importance of Equipment Breakdown Coverage
As the world becomes a more and more technologically driven place, equipment breakdown insurance is only becoming more important. Think about how much your business relies on the internet. If you manage your documents via a cloud-based service, then you can’t access company files (including client information) without an internet connection. Similarly, if you make all of your product sales through an e-commerce site, then a computer network or Internet issue could impair your company’s ability to fulfill orders and keep customers happy.
With all of these angles considered, it becomes apparent just how much even a minor equipment failure can impact a 21st-century business. As a result, it is vital for all businesses to have equipment breakdown coverage in their insurance policies. Even if your company doesn’t use much actual equipment beyond computers and printers, failures of those assets can still be costlier than you might realize.