What is equipment breakdown insurance?

Equipment breakdown insurance, formerly known as boiler and machinery (B&M) insurance, protects mechanical, electrical, computer and communication equipment, HVAC and refrigeration systems, and boilers and pressure equipment from damage caused by covered internal forces such as power surges, electrical shorts, mechanical malfunctions, motor burnout, or operator error.

Equipment breakdown coverage may also be part of your homeowners policy, except that it protects various home systems and appliances such as furnaces, refrigerators, ovens, water heaters, home gym equipment, and home entertainment systems. Although homeowners insurance covers household appliances in the event they are destroyed from a fire or bad storm, this type of insurance does not cover loss due to mechanical or electrical failure, whereas equipment breakdown insurance does.

Once you pay the deductible, this coverage may reimburse for temporary or permanent repairs, replacement equipment, and resulting additional living expenses.

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When do I need to be aware of equipment breakdown insurance?

There are numerous instances in which you may be able to take advantage of equipment breakdown insurance. For example, if your restaurant business depends upon online orders, a power outage could cause your business to suffer and result in the loss of heat, the ability to process orders, as well as the ability to prepare, cook, and serve food. Likewise, if your home refrigerator stopped working because of an artificial electrical current or mechanical breakdown, your insurance would reimburse you for repair or replacement, after you pay the deductible. The coverage would also reimburse you for food spoilage that resulted from the breakdown.

What is important to know about equipment breakdown insurance?

Not everyone is aware of equipment breakdown insurance. Understanding details of the coverage can help people make an informed decision. There are some other important items you should know about equipment breakdown insurance:

Equipment breakdown insurance is available for both residential and commercial owners, and business equipment is covered even if the equipment is leased or if the equipment problem is off site.
This insurance does not cover replacement or repairs if the damage is due to normal wear and tear, mold, defects, shrinking, or pest damage.
This insurance does not cover problems that arise from failing to maintain and take proper care of your equipment.
If you get commercial equipment breakdown insurance, you may also be reimbursed for lost income if the breakdown forced you to shut down operations for a given period of time.
Although equipment breakdown insurance covers computers, it does not cover software.
Equipment breakdown insurance is not the same as a home warranty, which only covers specific equipment, whereas a breakdown endorsement covers all applicable household appliances.