Most Every Business has 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 needed for operations and manufacturing. These days, almost every business has some 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, which can be a good back-up plan, but not the best recovery method after a major loss.
There are various causes of equipment breakdown, such as:
- - Supply line surges
- - Excessive moisture
- - Insulation deterioration
- - Overload conditions
- - Lubrication failure
- - Improper repairs
- - Poor connections
- - Foreign material affecting windings and electrical circuits
A standard business property policy excludes coverage for artificially generated electrical currents, mechanical breakdown, and explosion. An Equipment Breakdown Policy is designed to fill in these coverage gaps.
Fragile electronic and computerized 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 business failure, not just for your business, but others that rely on your company’s 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 POS systems to process transactions can loose 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 destroy 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 necessary expenses to help expedite a business’ period of restoration. Policies can include coverage for extra expenses during the restoration period which 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 how 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.