What is Equipment Breakdown Insurance?

March 13, 2023

When equipment breaks down that’s essential to your business—like your restaurant’s refrigerators conking out after a power surge—it can be disruptive and costly. Equipment breakdown insurance can ease the financial pain.

Here’s why it’s smart to include equipment breakdown coverage in your business insurance policy.

How Does Equipment Breakdown Insurance Work?

Equipment breakdown insurance is a type of property insurance that provides protection against the financial losses that can occur when equipment breaks down. Equipment breakdowns can happen for a variety of reasons, including power surges, mechanical failures, and even vandalism. And when they do occur, they can be costly to repair or replace.

That's where equipment breakdown insurance comes in. EBI can help cover the cost of repairs or replacement, as well as lost income if your business is forced to shut down due to a breakdown.

Equipment breakdown insurance is an important part of any business insurance policy, but it's often overlooked. Make sure you're protected by adding EBI to your business insurance policy today.

Why Do I Need Equipment Breakdown Insurance?

Equipment breakdown insurance is crucial because it covers issues that other types of coverage neglect. Commercial property insurance, for example, seldom covers mechanical or equipment problems.

Damage to your company's assets caused by external circumstances, such as fires, vandalism and wind, is covered by commercial property insurance. The same goes for business interruption insurance: it wouldn't apply in these situations since it aids you in regaining lost income after incidents like a fire.

What Does Equipment Breakdown Cover?

Equipment breakdown insurance can protect you financially if your equipment is accidentally damaged or destroyed. For business owners, this type of policy typically covers items such as:

- Boiler systems

- Computers and phones

- Electrical cables and transformers

- Elevators and escalators

- HVAC systems

- Manufacturing equipment

- Motors, engines, elevators and water pumps

- Production systems like machining tools, food processing equipment and robotics

- Refrigerators and refrigeration equipment

- Retail point-of-service devices

- Security and fire alarm systems

Not only does equipment breakdown insurance reimburse you for the cost of repairing or replacing covered items, it can also cover:

- Food spoilage

- Lost business income due to the breakdown

- The extra cost of temporary or urgent repairs

- Property damage liability, or accidental damage to someone else’s property caused by the breakdown

- Equipment inspections required because of the breakdown

After an incident covered by your policy, you may be eligible for equipment breakdown insurance. For example, HSB's equipment breakdown insurance covers the following:

- Additional cost for building code compliance

- Demolition costs

- Extra related expenses, such as equipment rentals

- Lost income if you choose to sell damaged merchandise for less than its full brand value

- Portable equipment damaged offsite

- Lost business income and extra expenses when contracted equipment fails

What Isn't Covered By Equipment Breakdown Insurance?

Equipment breakdown insurance does not cover normal wear and tear. For example, if your 20-year-old refrigerator fails due to age, equipment breakdown coverage would not reimburse you for a new one.

Data theft, as well as software malfunctions and cyber assaults, are also usually excluded from equipment breakdown insurance. To protect against software failure, you'll frequently need cyber liability insurance.

Who Should Buy Equipment Breakdown Insurance?

Organizations that might want to consider equipment breakdown insurance include:


Tech companies

Convenience stores


Local governments






Shopping centers

For such organizations, equipment breakdown insurance may be particularly valuable if they rely heavily on income that could be disrupted by a breakdown. This is not an exhaustive list and any company that relies on equipment to keep their company running should talk to a broker about EBI.

How Much Does Equipment Breakdown Insurance Cost?

The cost of equipment breakdown insurance varies depending on the business and the limits of coverage. Equipment value, business size, industry and company history are all important factors in setting rates.

For example, a small business with $50,000 in equipment value may pay as little as $500 for this type of coverage, while a company with $5 million in equipment may pay $5,000 or more annually. Equipment breakdown insurance is often bundled with property insurance for added protection at a lower price.

How Does Equipment Breakdown Insurance Work?

If your equipment is damaged or destroyed, you'll need to file a claim with your insurance company. Your claim will be reviewed by an adjuster, who will determine if the damage is covered under your policy.

If your claim is approved, you'll be reimbursed for the cost of repairs or replacement, as well as any lost income or other expenses related to the equipment breakdown. Equipment breakdown insurance can help you get your business up and running again after a setback.

When Should You Buy Equipment Breakdown Insurance?

The best time to buy equipment breakdown insurance is before you need it. That way, you'll be protected in the event of an accident or equipment failure. Equipment breakdown insurance is typically included in business property insurance policies. You can also purchase it as a stand-alone policy.

If you're considering adding equipment breakdown insurance to your business property policy, talk to Summit Commercial Solutions today about your options. Equipment breakdown insurance can help you get your business back on track after a covered incident.

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