Business relies more on technology than we ever have. Technology has given you the tools to grow your business, but it also makes your ability to generate revenue reliant upon it. The technology and equipment you use to run your business is therefore an opportunity and a threat. I’ll talk today about an important but often over-looked type of insurance coverage – Equipment Breakdown.
Equipment Breakdown Coverage
Equipment Breakdown is a type of insurance coverage that protects the equipment & devices your business relies on from things like electrical and mechanical breakdown. I’ll cover a few quick areas of this important insurance coverage.
First, I’ll make a case for why the coverage is important.
Next, I’ll review the most common types of Equipment Breakdown to give you an idea of what types of things are covered.
Finally, I’ll review a case study, going through an example of where coverage saved a business time, frustration, and money.
Why is Equipment Breakdown Coverage Important?
Take a minute to think about the different types of equipment your business relies on. Some of the more common examples include:
- Computer Equipment
- Point of Sale Systems
- Refrigeration Systems
- Heavy Machinery
- Specialized Medical or Manufacturing Tools
Now, take a minute to think of how the failure of the equipment you rely on could impact your business. Would the equipment or device be hard or expensive to replace? Would you lose revenue without this equipment functioning as you expect it to?
Some examples of how vulnerable your business might be to Equipment Breakdown losses include:
- Expensive High-Tech Equipment is sensitive & vulnerable. Something as small as static electricity can damage some highly sensitive circuitry to the point it needs repair or replacement.
- Breakdowns can lead to interruptions in communications – lost time leads to lost revenue.
- Technology is often inter-dependent. Failure of one device in a critical path can prevent other operations from moving forward.
- The more complicated or specialized a device is, the harder it may be to get it fixed or replaced.
Examples of Equipment Breakdown Coverage
An electrical system can make up to 15% of a building’s worth. Combine this with the fact that without electricity, most business functions come to a halt.
Here’s an example of how Equipment Breakdown Coverage can apply:
A short circuit in a transformer spreads and destroys a large part of the system. Renting a generator is expensive – the costs can run rampant as the size of the building increases and the length of time it takes to make repairs.
HVAC & Refrigeration Systems
Most commercial buildings have HVAC units on the roof, which requires heavy equipment such as a crane to replace. Additionally, businesses such as restaurants will suffer loss of revenue if the dining area isn’t a comfortable temperature as well as loss of inventory if the refrigerators break down.
An outage of internet service can prevent your business from servicing your clients and bringing in new business. A power surge can destroy services, computers, point of sale systems, and workstations.
What Types of Things Does Equipment Breakdown Cover?
The best way to think of Equipment Breakdown is as a specialized type of property coverage. Your building, personal property, and business income are typically things covered by the Equipment Breakdown coverage. It covers these things from separate causes of damage than the standard property insurance policy.
Case Study: Restaurant Looses Food & Customers
A popular family restaurant experienced a power surge during a heat wave that overloaded all of their refrigerators and air conditioning units. It took more than a week to get everything fixed and replaced, but by that time, food had spoiled and they’d lost a week’s worth of revenue.
There was more than $20,000 in food lost due to spoilage, another $12,000 in repair costs, and more than $25,000 in lost income.
The restaurant thankfully had Equipment Breakdown Coverage and the necessary maintenance contracts in place for the coverage to apply.
Business Owners typically feel confident in the insurance coverage they have; however, there are often gaps in coverage that get overlooked without periodic and thorough reviews. If it’s been a while since you’ve conducted a thorough review of your coverage – or if your annual risk survey has turned into a question about what a risk survey even is – I highly recommend a thorough review.
A conversation about your business and a coverage audit is a good way to start the conversation. You can call us anytime at (610) 671-3500 or book an appointment here: