In today’s fast-paced and technology-driven landscape, businesses rely heavily on a wide range of equipment and machinery to power their operations, streamline processes, drive productivity, and, of course, increase customer satisfaction. Yet, no matter how advanced or reliable a company’s equipment may be, equipment breakdowns can and do occur, and when they do, they can result in costly emergency repairs and even cause a halt in business activities.
This is where equipment breakdown insurance steps in as a trusted solution for business owners and insurance agents alike. As a specialized type of insurance coverage, equipment breakdown insurance is designed to lessen the financial risks associated with sudden and unexpected equipment failures.
Whether it’s a Michelin-starred restaurant serving decadent dishes or a school shepherding K-12 educational programs with the latest technology, businesses of all types benefit from equipment breakdown insurance. Here’s how insurance agents can determine whether or not their client needs equipment breakdown insurance.
Dependency on Critical Machinery
If certain equipment serves as the backbone of a business, then it’s a good indicator that the business will benefit from equipment breakdown insurance. There are some occupations, such as a computer programmer, where the main operations simply depend on the use of a laptop and proprietary software. On the other hand, some businesses rely heavily on complex machinery to power their operations. Here are some examples of businesses that depend on machinery and equipment:
- Restaurants: A fundamental component of running a restaurant business is operating kitchen equipment like refrigerators, stoves, ovens, and more. It may be impossible to open for business if any component of the kitchen machinery fails.
- Schools: Schools are nurturing environments that shape the minds and futures of children. In order to create the best possible educational experience, schools rely on a variety of machinery and equipment that support the educational development of students. Multimedia equipment such as projectors, interactive whiteboards, and computers create an engaging learning environment. Heating, ventilation, and air conditioning ensure that students and staff are comfortable throughout the day. Lighting makes it possible for everyone to take in visual information and maneuver safely around the building.
- Healthcare: Equipment plays a big part in allowing healthcare professionals to make accurate diagnoses and provide effective treatment so patients receive the highest quality of care. This can include the use of state-of-the-art technology such as MRI machines, life-support equipment, and robotic surgery devices as well as fundamental technologies to include climate-control, culinary, laboratory, and janitorial equipment.
- Construction contractors: Artisan contractors rely on a wide range of equipment for their projects, depending on their specialties. Tile and flooring installation projects, solar-panel installations, and kitchen renovations use different types of technology, but they all need that equipment to be ready to go when it’s time to get to work.
- Publishing and printing companies: From books to pamphlets to packaging inserts, commercial printers rely on a wide range of equipment to design and print high-volume orders with efficiency and precision.
Vulnerability to Equipment Malfunction
Equipment breakdown can result from any number of contributing factors – and always at the worst possible time! Some of the most common causes of equipment breakdown and malfunction stem from issues with the electrical system.
- Power Surges: Most electrical equipment is designed to operate within specific voltage ranges. A power surge happens when there’s a sudden increase in the electrical voltage; this can exceed the item’s capacity for handling the specified voltage power and result in equipment damage.
- Electrical shorts: An electrical short happens when a pathway is connected between two points in an electrical system that causes an excess of current flow, which can have a detrimental effect on the equipment involved.
- Voltage fluctuations: Voltage fluctuations refer to the cyclical changes in voltage. A negative effect of voltage fluctuations is that the equipment can no longer handle the expected load, thereby resulting in failure.
In addition to electrical failures, equipment can break down due to:
- Lack of maintenance: All equipment needs some TLC now and then. Without proper maintenance, machinery components can become worn or degraded. In many instances, these small issues can accumulate to major repair problems down the line. For example, boilers are susceptible to leaks and corrosion, and, without proper maintenance, boilers can become damaged beyond repair.
- Excessive use: Some equipment serves as the heartbeat of a business; it’s so intertwined with the daily cadence of operations that business can’t be conducted without it. This type of equipment is susceptible to breakdown due to excessive use. Components become compromised, resulting in premature failure.
- Environmental conditions: Extreme temperatures, humidity, dust, and even pollen can erode machine components. And let’s not forget animal activity. Data published by the American Public Power Association puts squirrels in the Number 2 spot for top causes of power outages (and the critters take the top spot in Wisconsin).
- Human error: Accidents, mishandling, improper operation, and improper maintenance procedures can all contribute to equipment failures.
Insurance Solutions for Equipment Breakdown
As an illustration of how equipment breakdown insurance can help businesses, consider the following scenarios:
- Scenario 1 – Office Building: A severe storm caused multiple power surges in the electrical systems of an office building. The tenants incurred $14,000 in property damage, and expenses related to business interruption totaled over $38,000. The property policy was endorsed with equipment breakdown coverage, which covered the losses. The businesses were up and running within three days.
- Scenario 2 – Restaurant: A severe storm caused multiple power surges in the electrical system of a family-owned restaurant, and resulted in damage to the compressor. The owners of the restaurant incurred $2,800 in property damage, $2,200 in food spoilage, and another $8,000 in business interruption. The restaurant did not have equipment breakdown coverage. As a result of the losses sustained, the business could not recover and closed its doors after 12 years in operation.
What Equipment Breakdown Insurance Covers
For businesses that rely on complex machinery, equipment breakdown insurance is an important safety net because commercial property insurance may not cover mechanical or equipment failure, especially when it is the result of electrical shorts, power surges, and motor burnout.
Monoline equipment breakdown policies may offer a wide range of coverage including:
- Ammonia contamination
- Business income
- Computer equipment, data, and media
- Electronic circuitry impairment
- Fungus, wet or dry rot
- Hazardous substance
- Jurisdictional inspections
- Property damage
- Spoilage
- Utility interruption
- Water damage
Protect your client’s business from the high costs associated with unexpected equipment failure, and enable their operations to continue uninterrupted with equipment breakdown coverage. MiniCo’s exclusive Equipment Breakdown program provides monoline coverage for commercial properties to protect critical business equipment. Contact us for a quote today.