What is equipment breakdown coverage?

Equipment breakdown coverage, sometimes known as boiler and machinery insurance, pays for financial loss caused by the mechanical breakdown of household appliances and equipment in your home. Although the exact systems covered will vary by company, some examples of household equipment and appliances include:

• Back-up generator
• Computers and equipment
• Dishwasher
• Electrical panel
• Furnace
• Heat pump
• Home automation and security systems
• HVAC system
• Refrigerator and freezer
• Stove and oven
• Sump pump
• Swimming pool equipment
• Water heater
• Washer and dryer

Insurance companies typically offer between $10,000 and $50,000 in equipment breakdown coverage, but higher amounts may be available. The specific systems and equipment covered by equipment breakdown will vary by provider. Some companies may give you the option to increase the coverage amount for an additional premium.

Who needs equipment breakdown coverage?

While homeowners, condo owners and renters might get value from equipment breakdown coverage, landlords and business owners may also benefit from this type of insurance. An unexpected mechanical or electrical breakdown could shut down a business or cause tenant discomfort if a system fails unexpectedly, which could result in a loss of income. With equipment breakdown insurance, landlords and business owners have financial protection in place if a mechanical breakdown happens.

Equipment breakdown coverage for businesses

Business owners can get financial protection by including equipment breakdown coverage in their business insurance policies. Because businesses may be more complex than homes, business equipment breakdown insurance is often broader in coverage than it is for homeowners and renters. It may even pay for lost business income while the problem is corrected, restoration expenses, mandatory inspections, repair costs (including labor and time) and spoiled inventory. Businesses that may benefit from equipment breakdown coverage include hotels, restaurants, manufacturing companies and those dependent on computers, phone and voicemail systems.

Equipment breakdown insurance for businesses often includes:

• Air conditioners
• Boilers
• Cables and electrical panels
• Computers systems
• Elevators
• Fire alarm and security systems
• Generators
• Heating systems
• Manufacturing equipment
• Phone/voice mail systems
• Pressure equipment
• Specialized production equipment
• Transformers
• Water pumps

For example, if a transformer blows outside a restaurant, it could cause a power outage and surge. The entire restaurant might be without power for days until the problem can be resolved. In that time, food in the refrigerator and freezer would likely spoil and the restaurant would be closed to patrons. Equipment breakdown coverage might pay for the restaurant’s lost income, the cost to repair the refrigerator and freezer and the replacement cost of the spoiled food. If other covered equipment was damaged due to the power surge, there may be coverage for those items as well.

Equipment breakdown coverage for landlords

Mechanical breakdown coverage for landlords is similar to coverage for homeowners. Equipment failure is typically not covered without the equipment breakdown endorsement. For landlords, equipment breakdown coverage covers items in the home you rent to tenants, like:

• Electrical panels
• Elevator/lift/hoist
• Back-up generators
• HVAC systems
• Media equipment
• Refrigerator and freezer
• Stove and oven
• Smart home systems
• Sump pump
• Swimming pool equipment
• Water heater

If an electrical or mechanical breakdown happens and is not resolved quickly, you could lose a tenant and income. Consider the following situation: Your tenant calls to notify you the air conditioning is not working on a hot day in the summer. In fact, none of your tenants have air conditioning in a four-unit complex. If your landlord insurance policy includes the equipment breakdown coverage endorsement, you may be able to file a claim for the cost to repair or replace the air conditioning and for any lost income if your tenants are displaced.

What is the difference between equipment breakdown coverage and a home warranty?

Equipment breakdown coverage is different from a home warranty in a few ways. Equipment breakdown is an optional coverage you can purchase as part of an insurance policy, while a home warranty is a separate policy usually purchased from a home warranty company. Additionally, the cost for a home warranty will usually be higher than the cost of adding on equipment breakdown insurance.

Because a home warranty is a service contract and not an insurance policy, you may be limited on how many services you can get and how much the warranty company will cover. You may have to pay a service fee for each claim filed. However, a home warranty may offer more coverage than equipment breakdown insurance, including coverage for normal wear and tear and general maintenance, which homeowners insurance does not cover. It is important to note that neither insurance nor a home warranty will give you universal home protection. While having both options in place can help to protect your finances, it is difficult to protect yourself and your home against all possible causes of damage.

What is not covered by equipment breakdown coverage?

Equipment breakdown coverage does not cover damage caused by normal wear and tear, age, poor maintenance, rust, corrosion, manufacturer defects, mold, expansion or shrinking and pest damage. There may be restrictions on the age and condition of the appliances and systems covered when you purchase the coverage through your homeowners insurance policy. To find out the specifics and limitations specific to your carrier, ask your insurance agent or company to review the equipment breakdown endorsement with you.