Go Beyond the Basics with Equipment Breakdown Coverage
Standard commercial property policies do not provide equipment breakdown coverage. They contain exclusions that eliminate coverage for mechanical breakdown, electrical injury to electrical devices (other than damage from lightning), and explosion of steam and hot water equipment. These exclusions also eliminate coverage for loss of income and extra expenses resulting from the excluded direct damage losses.
You can grow your career by expanding your knowledge of the equipment breakdown insurance that is needed to close these potentially important gaps in coverage.
Equipment Breakdown versus Boiler and Machinery Insurance
At one time, what is now called "equipment breakdown insurance" was most often called "boiler and machinery insurance." It was provided by traditional boiler and machinery policies that granted coverage for "accidents" to insured "objects." These policies contained lengthy, technical definitions of insured "objects."
Today, however, equipment breakdown insurance policies have largely replaced traditional boiler and machinery insurance policies. In fact, equipment breakdown insurance might be described as an updated version of boiler and machinery insurance. Equipment breakdown policies differ from traditional boiler and machinery policies in that they use everyday terms such as "breakdown" and "equipment," and they typically grant coverage for the breakdown of nearly all kinds of equipment.
Who Needs Equipment Breakdown Insurance?
Organizations that have steam boilers and similar equipment on their premises usually recognize their need for equipment breakdown coverage. Governmental entities generally require this equipment to be inspected on a regular basis to be sure that it can be operated safely, and this requirement can usually be met with the inspections performed by insurance company boiler inspectors. For this type of equipment, insurance is sometimes purchased as much for the insurer's inspection service as for the insurance protection.
But, even organizations that do not own or operate steam equipment have at least some exposure to loss from equipment breakdown since nearly every organization owns or operates some type of mechanical and electrical equipment, even if it is only everyday office equipment. For many organizations, this loss exposure is significant enough to warrant the purchase of equipment breakdown coverage, particularly when the potential for resulting business income and extra expense losses is considered.
Resources for Learning about Equipment Breakdown Insurance
IRMI's Commercial Property Insurance provides the following resources to help you gain a solid grasp of equipment breakdown coverage.
- A broad overview of the main features of this coverage line
- A detailed comparison of the Insurance Services Office, Inc., equipment breakdown coverage form with the equipment breakdown coverage forms of two major insurers that write equipment breakdown coverage
Discussions of traditional direct damage and time element boiler and machinery insurance coverage are also provided for historical purposes.
Leverage these tools and the rest of IRMI's commercial property resources to make yourself a trusted adviser in this area for your clients or your organization.
