Equipment Breakdown Coverage | Bankrate

Homeowners insurance covers sudden and unexpected damage to your home’s appliances and major systems when it’s caused by a covered peril, like a fire or windstorm. However, it doesn’t apply to damage caused by mechanical breakdowns or electrical problems. If you want coverage for equipment and appliance breakdowns, you’ll need to add an equipment breakdown insurance endorsement.

What is equipment breakdown coverage?

Equipment breakdown coverage, sometimes known as boiler and machinery insurance, pays for financial loss caused by the mechanical breakdown of household appliances and equipment in your home. Although the exact systems covered will vary by company, it typically covers the following categories:

• Mechanical systems: Backup generators, sump pumps, swimming pool equipment
• Electrical systems: Electrical panels, lights, wiring, electric meters
• Electronics and communication systems: Computers, phone systems, routers, home automation systems, security systems, fire alarm systems
• HVAC systems: Air conditioning systems, heat pumps
• Boilers: Furnaces, water heaters
• Appliances: Dishwashers, refrigerator, freezers, stoves, ovens, washing machines, dryers

Insurance companies typically offer between $10,000 and $50,000 in homeowners equipment breakdown coverage, but higher amounts may be available. The specific systems and equipment covered by equipment breakdown will vary by provider. Some companies may give you the option to increase the coverage amount for an additional premium.

Experts recommend comparing quotes from several insurance providers to find the coverage that best fits your needs and budget.

How an equipment breakdown coverage claim works

If a system or appliance in your home stops working unexpectedly, you can file a claim with your insurance company. An adjuster might visit your home to assess the damage in person and figure out how much it will cost to repair or replace. If your claim is approved, you will receive a check to cover the cost of the claim, minus your deductible.

For instance, imagine that the power goes out one evening and your generator doesn’t turn on. You think it’s broken, so you report the claim to your insurance company. After further inspection, the claim representative determines that you’ll need to replace the entire unit.

In this case, your insurance company would cover the cost of purchasing a new generator, hauling the old generator away and installing the new unit.

Who needs equipment breakdown coverage?

Many property owners can benefit from having equipment breakdown insurance. This includes:

• Homeowners: If you own a house or condo, or rent an apartment, having equipment breakdown insurance provides peace of mind in case a system or appliance breaks down unexpectedly.
• Landlords: Landlords are responsible for maintaining the systems, appliances and equipment in individual apartments. Having equipment breakdown insurance provides financial protection in case something needs to be repaired or replaced.
• Business owners: Many business owners rely on systems and appliances for their daily operations. An equipment breakdown policy ensures that business owners can pay for repairs without sacrificing business income.

In addition, equipment breakdown insurance can be worth it in certain situations. Here are a few scenarios where having equipment breakdown coverage might be a good idea:

• You recently renovated your home: If you recently renovated your home and replaced major home systems or appliances, equipment breakdown insurance can provide an added layer of financial security if something goes wrong.
• You replaced old appliances with expensive ones: Equipment breakdown insurance can be beneficial after replacing old or outdated appliances with brand new ones with a high price tag.
• You can’t afford repairs on your own: If you couldn’t afford to repair or replace an appliance or system that broke down unexpectedly, equipment breakdown insurance can lessen the financial impact on your wallet.

Equipment breakdown coverage for businesses

Business owners can get financial protection by including equipment breakdown coverage in their business insurance policies. Businesses that may benefit from equipment breakdown coverage include hotels, restaurants, manufacturing companies and those dependent on computers, phone and voicemail systems.

• Equipment breakdown insurance for businesses often includes:

  • • Cables and electrical panels

  • • Fire alarm and security systems

  • • Specialized production equipment

For example, if a transformer blows outside a restaurant, it could cause a power outage and surge. The entire restaurant might be without power for days until the problem can be resolved. In that time, food in the refrigerator and freezer would likely spoil and the restaurant would be closed to patrons. Equipment breakdown coverage might pay for the restaurant’s lost income, the cost to repair the refrigerator and freezer and the replacement cost of the spoiled food. If other covered equipment was damaged due to the power surge, there may be coverage for those items as well.

• Additional coverage that business equipment breakdown policies offer

  Because businesses have more complex coverage needs than homes or apartments, business equipment breakdown insurance is often broader in coverage than it is for homeowners and renters. Here are the additional coverages that equipment breakdown policies usually include for businesses:

  • Lost income: If you have to temporarily close your business while repairs are made, equipment breakdown insurance will cover lost business income.
  • Additional expenses: Equipment breakdown will cover additional expenses you might face after a claim, like mandatory inspections.
  • Food spoilage: For food and beverage businesses, equipment breakdown insurance covers food items that get spoiled due to a broken down system or appliance.
  • Utility bills: If a utility provider’s equipment breaks down and you’re unable to get regular service (like plumbing or electric), your policy will cover lost income, food spoilage and other expenses you might incur.
  • Legal ordinances: If you’re legally required to replace systems or rebuild property to comply with current building codes, equipment breakdown insurance can help cover the cost.

Equipment breakdown coverage for landlords

Mechanical breakdown coverage for landlords is similar to coverage for homeowners. Equipment failure is typically not covered without the equipment breakdown endorsement.

• For landlords, equipment breakdown coverage covers items in the home you rent to tenants, like:

  • Electrical panels
  • Elevator/lift/hoist
  • Backup generators
  • HVAC systems
  • Media equipment
  • Refrigerator and freezer
  • Stove and oven
  • Smart home systems
  • Sump pump
  • Swimming pool equipment
  • Water heater

If an electrical or mechanical breakdown happens and is not resolved quickly, you could lose a tenant and income. Consider the following situation: Your tenant calls to notify you the air conditioning is not working on a hot day in the summer. In fact, none of your tenants have air conditioning in a four-unit complex. If your landlord insurance policy includes the equipment breakdown coverage endorsement, you may be able to file a claim for the cost to repair or replace the air conditioning and for any lost income if your tenants are displaced.

What is the difference between equipment breakdown coverage and a home warranty?

Equipment breakdown coverage is different from a home warranty in a few ways. Equipment breakdown is an optional coverage you can purchase as part of an insurance policy, while a home warranty is a separate policy usually purchased from a home warranty company. Additionally, the cost of a home warranty will usually be higher than the cost of adding on equipment breakdown insurance.

Because a home warranty is a service contract and not an insurance policy, you may be limited on how many services you can get and how much the warranty company will cover. You may have to pay a service fee for each claim filed. However, a home warranty may offer more coverage than equipment breakdown insurance, including coverage for normal wear and tear and general maintenance, which homeowners insurance does not cover. It is important to note that neither insurance nor a home warranty will give you universal home protection. While having both options in place can help to protect your finances, it is difficult to protect yourself and your home against all possible causes of damage.

What is not covered by equipment breakdown coverage?

Equipment breakdown coverage typically does not cover damage caused by normal wear and tear, age, poor maintenance, rust, corrosion, manufacturer defects, mold, expansion or shrinking and pest damage. There may be restrictions on the age and condition of the appliances and systems covered when you purchase the coverage through your homeowners insurance policy. For further details and to learn about limitations specific to your carrier, ask your insurer to review the equipment breakdown endorsement with you.

Frequently asked questions

• How much does equipment breakdown coverage cost?

  The cost of equipment breakdown coverage varies by insurance company and the coverage level that you purchase. Mechanical breakdown coverage is an optional coverage that you might be able to add to your insurance policy. Your insurance premium will likely increase if you add this coverage, but the cost of equipment breakdown insurance is less than the cost of a homeowners policy, a business insurance policy or a landlord insurance policy as a whole.

• Is equipment breakdown coverage worth it?

  The older your home appliances, the more equipment breakdown coverage may be worth it. Replacing appliances can be expensive, especially if multiple fail in close succession. Replacing aging appliances with newer, high-efficiency models can end up saving you money on your energy bill, and having equipment breakdown coverage can help offset the cost of the new appliances, making the cost of this optional coverage worthwhile for many.

• How is commercial property insurance different from equipment breakdown insurance?

  Commercial property insurance, much like homeowners insurance, covers the building you own or rent and your business property, which includes tools, equipment, supplies and merchandise. These items are protected against covered perils, including external causes, such as fire. Equipment breakdown coverage applies to covered perils that are internal, such as power surges and motor failure.

• What is the best home insurance company?

  The best home insurance company will depend on your specific needs and where you live. Available coverage options may dictate the best fit for you, and some insurers only serve certain locations. Experts recommend shopping around and comparing quotes. It may also be beneficial to take company reviews into account to get an idea about whether other homeowners have had a good experience with a certain insurer.