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Equipment Breakdown Insurance
Prepare for the financial impact when a sudden breakdown puts essential business equipment out of action.
- In short
- Equipment breakdown fills the gap property policies leave for sudden mechanical or electrical failure.
- Who or what is protected
- The equipment your business depends on, and losses that follow its failure.
- Where it stops
- Sudden internal failure is covered; gradual wear and maintenance are not.
When equipment fails from the inside
This guide helps you distinguish sudden internal failure from wear, maintenance, and external damage.
Policy background and wording
Equipment breakdown insurance, sometimes called boiler and machinery coverage, helps with the sudden and accidental failure of essential equipment such as electrical systems, HVAC, refrigeration, production machinery, and computer systems.
Standard commercial property policies commonly exclude losses from mechanical or electrical breakdown, which is the gap equipment breakdown coverage is designed to fill. It often includes resulting damage and lost income tied to the failure.
Breakdown is not maintenance
Sudden covered internal failure differs from wear, corrosion, or routine servicing. Spoilage and income loss need their own terms and limits checked.
Who typically looks at it
- Manufacturers with production equipment
- Restaurants and food businesses with refrigeration
- Healthcare facilities with critical systems
- Hotels and venues with HVAC and electrical systems
- Property owners with building systems
How it works
Why the equipment failed matters
Sudden internal failures point to equipment breakdown. External causes point to property. Wear points to maintenance.
Read the diagram as text
- A walk-in cooler’s electrics fail: Equipment breakdown (Sudden, accidental internal failure).
- A power surge damages HVAC controls: Equipment breakdown (Sudden, accidental internal failure).
- A production machine breaks down: Equipment breakdown (Sudden, accidental internal failure).
- A fire spreads into the plant room: Commercial property (External perils such as fire).
- An old boiler corrodes over years: Maintenance, not insurance (Wear, corrosion, servicing).
Terms on this page
- Boiler and machinery
- An older name for equipment breakdown coverage.
- Spoilage
- Perishable goods damaged by a covered failure, subject to limits.
- Resulting damage
- Damage caused by the covered breakdown itself.
Look deeper
Which equipment is commonly included?
Electrical systems, HVAC, refrigeration, boilers, production machinery, and computer or communication systems.
What to check: List the equipment that would stop the business if it failed.
Will it pay to upgrade?
Obsolescence or upgrades beyond restoration are excluded.
What to check: Ask how replacement of discontinued equipment is valued.
Equipment breakdown or commercial property?
The two are designed to work together.
| Commercial property | Equipment breakdown | |
|---|---|---|
| Cause | External perils such as fire or storm | Sudden internal mechanical or electrical failure |
| Breakdown | Commonly excluded | The core purpose |
| Spoilage, lost income | If business income is included, for property perils | When included, for covered breakdowns |
Scroll sideways to compare all columns.
What it may cover, and where it stops
Exact terms depend on the carrier, policy form, endorsements, and applicable law. Review the wording with your agent.
May cover
- Sudden mechanical or electrical breakdown of covered equipment
- Cost to repair or replace failed equipment
- Resulting damage from a covered breakdown
- Spoilage of perishable goods from a covered failure
- Lost income and extra expense from a covered breakdown, when included
Commonly excluded or limited
- Wear, tear, and gradual deterioration
- Lack of maintenance and pre-existing defects
- Losses covered under standard property perils such as fire
- Damage from external causes rather than internal failure
- Obsolescence or upgrades beyond restoration
Working through an example
Hypothetical and for illustration. Whether a real loss is covered depends on the facts and the policy.
- What happens
Refrigeration failure
A restaurant’s walk-in cooler suffers an electrical failure and food spoils.
- Which part is relevant
The failure is sudden and internal, so equipment breakdown is relevant to repair; spoilage coverage is relevant to the food.
- What could change the outcome
- Spoilage has its own limits.
- Lack of maintenance or a pre-existing defect is excluded.
- Deductibles apply.
Other situations
Electrical surge
A power surge damages computer systems and HVAC controls. Coverage may help repair or replace the affected equipment, subject to deductibles.
Before you talk to an agent
What underwriters usually weigh
- Type, age, and value of critical equipment
- Industry and dependence on continuous operation
- Maintenance practices and protective systems
- Selected limits, deductibles, and business-income options
- Claims history
Other questions owners ask
How is equipment breakdown different from commercial property?
Commercial property commonly excludes mechanical and electrical breakdown. Equipment breakdown coverage is designed to fill that gap for sudden, accidental internal failures.
Does it cover spoilage?
Many policies include spoilage coverage when a covered breakdown, such as a refrigeration failure, damages perishable goods, subject to limits.
What equipment is typically covered?
Coverage commonly extends to electrical systems, HVAC, refrigeration, boilers, production machinery, and computer or communication systems.
Can it include lost income?
Yes. Many policies can include business income and extra expense to help when a covered breakdown interrupts operations.
Talk through equipment breakdown insurance with an agent
We compare carriers, explain the wording, and help you choose limits that fit how your business actually runs.