Imagine it’s a typical July day. You own a 30,000-square-foot office building that is 85% occupied. And the air conditioning and ventilation systems stop working. The outside temperature is in the 90s and the humidity is high. It doesn’t take long before the tenants start to complain.
The contractor you summon determines that an electrical arc fried the circuit board that controls the systems.
The board must be replaced, but it will take up to five business days for it to arrive. In the meantime, the building is unfit for people to work in, and the leases oblige you to credit tenants’ rents for periods when the building is uninhabitable for more than a day. In short, you face thousands of dollars in repairs and much more in lost rents.
While your property insurance policy will cover property damage from events such as fires or explosions, it will not cover the equipment or lost income from the downtime during repairs.
But equipment breakdown insurance will.
Equipment breakdown insurance
This form of insurance is not a substitute for other property coverage. It will not pay for damage caused by fire, lightning, explosions from sources other than pressure vessels, floods, earthquakes, vandalism, and other causes of loss covered elsewhere.
Equipment breakdown policies are designed to fill in the gaps left by other policies, not to replace them. Also, they do not cover mechanical breakdowns that result from normal wear and tear as a device ages.
Equipment breakdown insurance helps cover:
- The cost to repair or replace damaged equipment, including time and labor
- Lost income
- Spoiled inventory
- Necessary expenses incurred during the restoration period
There are five categories of equipment that equipment breakdown insurance typically covers:
- Mechanical. This includes motors, engines, generators, elevators, water pumps and specialized production and manufacturing equipment.
- Electrical. This includes transformers, electrical panels and cables.
- Computers and communications. This includes computer systems, phone systems, voice mail systems, security systems and fire alarm systems.
- Air conditioners and refrigeration systems
- Boilers and pressure equipment
Why you need it
Many businesses rely heavily on machines in their daily operations, from computers and printers to refrigeration equipment, elevators and manufacturing equipment.
For some, the cost of repairs to this equipment and resulting downtime can have a serious impact on company finances. Such businesses should seriously consider buying equipment breakdown insurance.
Call us if you would like to discuss this crucial form of coverage.
