Properly functioning equipment is a key component to the success and profitability of many businesses. A malfunction could expose your company to large financial risks. A quick repair may mitigate any losses, but the more time you spend repairing or replacing equipment, the more losses you sustain. It could lead to tens of thousands of dollars' worth of losses—or even worse.

Luckily, business insurance that covers you in these situations is available and can prevent your company from hemorrhaging money while crucial equipment is non-operational. This article will cover basics of equipment breakdown insurance and go over a few considerations you should keep in mind when purchasing it.

Equipment Breakdown Insurance

Equipment breakdown insurance—also known as boiler and machinery insurance, a term coined before the widespread use of electronics—provides insurance coverage for a wide range of electrical or mechanical breakdowns during the course of business. This type of policy is important because other types of business insurance policies often do not cover it (learn The Basics of Business Insurance). More specifically, many businesses carry commercial and business interruption insurance, but these two types of business insurance don't necessarily include equipment breakdown. While your equipment will be covered, it may only be for external damage, such as fire, water, or weather damage, and not internal damage like malfunctioning parts, breakdowns, or electrical issues.

Not having adequate coverage can have serious financial consequences. Imagine an internal electrical flaw causes all four of an ice cream vendor’s freezers to break down at the same time. Not only would the vendor lose money to repair costs and product loss, but they could lose hundreds or even thousands of dollars' worth of business due to an inability to operate for an extended period.

Due to the possible coverage gaps in your business insurance, it may be wise for you to consider purchasing an equipment breakdown insurance policy for your business. This is especially applicable if your company relies on a lot of electrical power or older machinery or equipment.

Important Considerations

When purchasing equipment breakdown insurance, you have to consider a number of factors. First, besides the cost of repairs, it may be wise to shop for policies that also cover the monetary losses due to halted operations during equipment breakdowns. Having to stop your business from running, even for a short period, costs you money, and the right coverage can mitigate such losses.

Another important consideration is that often, the health of your equipment may depend on other equipment that isn't on your property. For example, if the electricity in your building is wired to a breaker in another location and that breaker gets damaged, it could cause damage to the equipment in your property. In such cases, it would make sense to consider extended coverage for this risk.

Finally, even if you lease your property or use equipment that belongs to others, you may still need equipment breakdown insurance to cover the equipment. In other words, a gap still may exist in the other insurance policies that cover the property and your business. Equipment breakdown insurance can protect you from risk exposures in this area.


If your company relies heavily on machines, equipment breakdown insurance is likely a very wise investment. No equipment isn't perfect and it can malfunction. By making sure you have the right kind of coverage, you won't have to lose your shirt when things go wrong with your machinery.