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A Complete Guide to Equipment Breakdown Coverage

Imagine you’re going about a normal day as a business owner when a power surge fries your computer system and other important electrical equipment. It might take days or weeks to recover from this type of unexpected incident. Plus, you will likely incur some extra expenses to get back on your feet quickly, while not bringing in a profit. Luckily, there is a type of insurance that can protect your business in this scenario: equipment breakdown insurance.

In this guide, we’ll help you understand how equipment breakdown coverage works, what types of equipment and expenses will be covered, how to select the best coverage for your business, and our recommendations for the best equipment breakdown insurance policies on the market.

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Understanding Equipment Breakdown Insurance

When your business relies on large equipment and machinery, or even common equipment like heating and cooling systems, equipment breakdown has the power to save your business in an unexpected situation. Many businesses that rely on in-person operations can benefit from equipment breakdown coverage, and this type of interruption is more common than you think. On average, equipment failure makes up 42% of unplanned downtime costs incurred by businesses each year, and in 2018, it made up one-third of all property-related losses, according to FM Global.

What Is Equipment Breakdown Insurance? 

Equipment breakdown insurance is a type of commercial coverage that protects businesses from losses and expenses when your business’s equipment breaks down. This can include boilers, electrical equipment, mechanical equipment, computer equipment, and more.

Equipment breakdown insurance can be purchased as a standalone policy, or you might find it included with a standard commercial property insurance policy. Equipment breakdown may be caused by incidents such as mechanical breakdowns, motor burnouts, power surges/failures, and short circuits, though the types of covered incidents will vary between policies and providers. Homeowners can also purchase personal equipment breakdown insurance to protect their home’s equipment when damage occurs.

Costs that are covered by equipment breakdown insurance might include lost income, repair or replacement costs, lost inventory, and liability expenses. Continue reading below for more information on costs covered by this type of insurance.

How Does Equipment Breakdown Coverage Work?

When you purchase equipment breakdown coverage, your provider may offer preventative services to discover and address potential risks that may lead to an equipment breakdown. Taking advantage of these services may also lower your premium in some cases.

If your equipment breakdown coverage is an add-on to an existing policy, you will not pay an additional premium, but the premium for your existing policy will increase by a small amount. If you purchase a standalone equipment breakdown policy, it will have its own premium, which may be paid on a monthly, semi-annual, or annual basis. 

If a piece of equipment breaks down at your business, it is important to start a claim with your insurance provider right away. Additionally, you must take steps to document all losses and expenses well. This includes taking photo evidence of any spoiled or damaged merchandise or property damage, and keeping receipts of additional costs incurred due to the interruption. Additionally, you must be able to present proof of income so that you can be accurately reimbursed for the loss of income you experience during the interruption. After your deductible is paid, your coverage will kick in and make up for your losses.

Your deductible will likely be classified by one of four categories, depending on your provider. 

  • Dollar deductibles refer to a specified amount of money that will be paid to the insurer before coverage begins 
  • Time deductibles often apply to loss of income following equipment breakdown. This means that a specified amount of time must pass after the incident before the insurer begins covering lost income. A common time deductible for loss of income is 72 hours. 
  • Daily value deductible, often referred to as average daily value (ADV), uses the average income of a business if an incident causing loss of income had not occurred. 
  • Percentage of loss deductibles, as the name implies, are a specified percentage of the total loss that is paid by the insured.

For equipment breakdown, you usually pay a deductible for each single breakdown of equipment. However, there are some cases in which deductibles are combined when an incident occurs that causes breakdown across multiple pieces of equipment at once. 

Equipment breakdown insurance policies are usually named perils policies. A named perils policy lists all of the covered events and items, and anything not mentioned will usually not be covered. This in contrast to an all-risk insurance policy, which typically covers everything unless it’s specifically excluded from the policy.

What Does Equipment Breakdown Insurance Cover?

Equipment breakdown insurance only covers scenarios that involve unexpected equipment breakdown. Below are some of the events that might lead to this type of incident.

Types of Events Covered

  • Power surges: A power surge can cause damage to equipment connected to the grid when there is a large fluctuation of power supply that is more than the normal supply voltage. When power surges occur, electricity flows in a way that the equipment is not designed to handle. Power surges can occur during severe weather involving lightning, grid overloads, blackouts, or faulty wiring. Businesses in areas with frequent severe weather or commonly unstable power grids can benefit from equipment breakdown insurance.
  • Short circuits: A short circuit occurs when electricity finds a shortcut within the electrical circuit of a piece of equipment. This can occur when a wire within the circuit is damaged, or when the circuit is installed incorrectly. Damage can be caused by pests, construction, deteriorated electrical insulation, loose connections, or water.
  • Loss of pressure: Most buildings contain a piping system that serves various systems throughout the building. Equipment breakdown insurance covers damage to equipment connected to the piping system when a failure within the system occurs. Boiler and machinery coverage, the predecessor of modern equipment breakdown insurance policies, was designed to cover steam boilers, steam turbines, and other steam-operated equipment from pressure losses and related damages. Vacuum equipment, which requires negative pressure to operate, also falls into this category.
  • Motor burnouts: Motor burnout refers to the breakdown of internal components of a motor. This can be caused by operating a motor beyond the recommended load, or it can simply occur as a result of degradation due to age. Motor burnout is not always the fault of the operator and is expected to occur gradually over the life of a motor. However, improper design or operation can accelerate the process. When it comes to motor burnout in your equipment, coverage will only apply when it is the result of operator error or faulty equipment design; it will not apply when burnout occurs due to age.
  • Operation errors: When an equipment operator fails to properly operate a piece of equipment, it can lead to several potential failures. For example, if the operator exceeds certain safety limits on a piece of machinery, it can lead to a breakdown. Many of the previously mentioned breakdown events can be caused by operator errors.

Types of Equipment Covered

While most of the language regarding what is covered in equipment breakdown policies is centered around what was covered by the antiquated boiler and machinery policies, a typical equipment breakdown policy has expanded to cover much more. According to Adjusters International, language regarding what is covered might read as follows:

(1) equipment built to operate under internal pressure, such as boilers and pressure vessels

(2) electrical or mechanical equipment used in the generation, transmission, or utilization of energy

(3) communication and computer equipment

(4) the equipment in (1), (2), & (3) used by utilities to supply its services

While this language might sound a bit vague, most equipment used by business owners will fall into one of these categories. We explain each in greater detail below.

  • Pressure equipment: Equipment breakdown insurance covers any equipment which operates at pressure, whether positive or negative (vacuum equipment). This includes boilers, air compressors, air storage tanks, fuel storage tanks, autoclaves, chemical reaction vessels, steam cookers, and any piping associated with these systems. For a commercial property, this can include machinery necessary for manufacturing  processes, or equipment responsible for portions of your HVAC system. Certain laboratory equipment also requires positive or negative pressure to operate, and would thus be covered by this policy.
  • Electrical or mechanical equipment: “Electrical or mechanical equipment used in the generation, transmission, or utilization of energy” may sound like an overly specific category, but this description applies to most mechanical and electrical equipment in some way. Items in this category include electrical equipment such as transformers, generators, circuit breakers, and and electrical distribution equipment within the building not owned by a utility provider. This category also includes HVAC components and renewable energy equipment that do not fall into the category of pressure equipment, such as furnaces, heat pumps, fans, air handlers, and any other components related to temperature control in your building. Additionally, most commercial cooking equipment utilizes energy in some manner, and is therefore covered within this category. This includes ovens, refrigerators, freezers, and many other appliances. Lastly, most manufacturing equipment, including lathes, mixers, packaging machinery, and milling tools fall within this category.
  • Communications and computer equipment: This category is often confused with electrical equipment, but extra language is usually provided to ensure that this category is covered. Communications and computer equipment functions to send signals through your business, such as fire alarm systems, telephone systems, security systems, point-of-sales equipment, workstations, printers, and internet transmission systems not owned by a utility provider. It is important to note that equipment breakdown insurance only covers breakdowns due to physical damage, and does not cover incidents due to a virus or software. For this type of coverage, you’ll need a cyber liability insurance policy.
  • Utility equipment: Any equipment that would normally fall into the categories above, but is owned by a utility provider is still covered but falls into the category of utility equipment. Coverage for utility equipment is limited to items located on the clearly defined premises of the business or policyholder.

Types of Expenses Covered

There is a standard form, called the ISO Form EB 00 20, that includes 10 coverage areas for equipment breakdown insurance. While some insurance providers may create their own forms, the ISO form is the industry standard, and many policies are informed by this document. 

Businesses can be complex, and a breakdown of a piece of equipment can cause losses with repercussions throughout the business’s operations. The following coverages are the types of expenses that will be available to select as part of your equipment breakdown coverage. The coverage will apply to losses that occur as the direct result of a covered loss, as outlined above, and each coverage will include its own limit. 

  • Business income and extra expense (or extra expense only): When an equipment breakdown directly causes lost income, whether through lost manufacturing capacity, inability to prepare certain culinary items, or inoperable communication equipment halting productivity, the lost income would be covered. Extra expense coverage covers the extra expenses incurred in order to continue to operate your business after a breakdown. Business owners can also elect to be insured only for extra expenses. 
  • Contingent business income and extra expense (or extra expense only): Similar to the previous scenario, contingent business income covers loss of income when a customer or supplier that your business relies on heavily experiences equipment breakdown. Some policies require naming the contingent business within the policy terms.
  • Property damage: Any damage caused by a covered loss to covered property. This includes repairs or replacement for covered property that is damaged as the result of an equipment breakdown. Covered property includes property owned or leased by the policyholder, as well as property in the custody or care of the policyholder.
  • Spoilage damage: When an equipment breakdown damages perishable merchandise or raw materials owned by the policyholder, related expenses are covered. Losses are also covered when the spoilage belongs to someone for whom the insured is legally liable (like products belonging to a business partner that is undergoing processing at your business). Typically, the loss must be due to loss or excess of power, heat, light, steam, or refrigeration due to an equipment breakdown.
  • Expediting expense: Extra costs incurred to expedite repairs to equipment that has suffered a breakdown.
  • Newly-acquired premises: When your business incurs expenses at a newly purchased or leased property as the result of equipment breakdown, coverage will apply in the same way as other covered premises.
  • Ordinance or law: When a covered loss requires repairs, demolitions, construction, or other costs due to a law or regulation.
  • Brands and labels: Similar to the brands and labels endorsement that you can add to your standard commercial property insurance policy, this expense results when branded or labeled merchandise is damaged due to an equipment breakdown. The insurer will compensate the business for the merchandise at an appraised value, at which point the insurer must label the merchandise as salvage and potentially remove branded labeling to protect the business owner’s reputation before reselling merchandise to recoup their losses.
  • Errors and omissions: This covers losses not payable because of an error or omission in the coverage description, an error or failure to include premises owned or occupied by the insured at the policy’s conception, or an error or omission unintentionally that results in the cancellation of any insured property.

Equipment Breakdown Coverage Exclusions

Traditional boiler and machinery insurance did not outline many exclusions, as the policies were straightforward and already limited in scope. As boiler and machinery insurance has evolved over time into equipment breakdown insurance, which has a wider scope of coverage, the exclusions have also increased. The most common exclusions are those that would already be covered in other policies and must be purchased separately.

  • Natural disasters or extreme weather: Equipment breakdown as a result of a natural disaster or other weather event is typically not covered by an equipment breakdown policy, as this type of damage would typically be covered by commercial property insurance.
  • Wear and tear: Equipment that fails due to age or normal wear and tear would not be covered by equipment breakdown insurance. These types of costs can be anticipated by the business owner and are a part of normal business operations.
  • Breakdown during equipment testing: If equipment breaks down during regular equipment testing, this would not be covered with equipment breakdown insurance. 
  • Computer equipment defects, viruses, or loss of data: Computer equipment is only covered if a physical incident occurs that leads to its damage or breakdown.

Your provider may reserve the right to suspend equipment breakdown insurance coverage if the covered equipment is found to be exposed to dangerous conditions that may cause equipment breakdown.

Be sure to thoroughly review your policy to understand all of the exclusions that may apply in different scenarios. Also, ask your provider about additional endorsements that may cover some of the exclusions that would provide important coverage for your business.

Who Needs Equipment Breakdown Coverage?

Any business that relies heavily on covered equipment to maintain regular operations should consider equipment breakdown insurance. If broken equipment has the potential to be catastrophic for your business, the benefit of equipment breakdown coverage might outweigh the cost of a premium. Below, we’ve outlined some examples of businesses that commonly purchase equipment breakdown insurance.

Manufacturing Facilities

Manufacturing facilities are perhaps the most obvious type of business to need equipment breakdown insurance. Many pieces of large equipment are integral to day-to-day operations in a manufacturing plant, and the breakdown of an expensive piece of equipment without coverage could be catastrophic. However, policyholders with this type of business should be careful to understand which pieces of equipment would be covered by equipment breakdown insurance (large equipment), and which would be covered by tools and equipment insurance instead. If you have a range of machinery, both types of policies may be necessary to protect your business.

Construction Firms

Construction firms are another business sector in which both equipment breakdown coverage and tools and equipment coverage would be valuable. However, large construction equipment covered by equipment breakdown might include generators on-site, or even computers and phones at the business’s main office.

Additionally, course of construction equipment breakdown insurance protects firms when essential systems, such as HVAC and electrical systems, break down during a construction project and cause an interruption. This type of coverage will protect the construction firm if a project is delayed and leads to a loss of income.

Landlords & Building Owners

When equipment breaks down, it may cause a space that you own to be uninhabitable for a period of time. Equipment breakdown insurance would make up for the loss of income while you are unable to lease the space. This might include systems required to meet safety protocols, such as a fire alarm system, or it could include HVAC and electrical equipment. Additionally, property damage that occurs as a result of equipment breakdown would also be covered, such as pipes freezing when a heat pump breaks down. This would allow you to repair and reopen the space in a timely manner. While landlords can purchase equipment breakdown coverage as an individual policy, it’s important to note that this coverage might already be included in an existing commercial property or landlord insurance policy.

Restaurants

Restaurants are fast-paced environments and require numerous pieces of equipment in order to operate efficiently. Cooking equipment, such as ovens, refrigerators, and freezers, and computer equipment, including systems used to place orders and process payments, are two of the most essential types of equipment for a restaurant to operate. Heating and air systems are also important for keeping the restaurant at a comfortable temperature for guests, and of course, electrical equipment is the foundation of all of these systems.

The loss of income coverage that equipment breakdown insurance provides could save a restaurant in the event of an interruption in service. On average, restaurant profit margins fall in the range of 3–5%. These low margins mean that a restaurant must operate consistently with a steady flow of customers to stay in the green. Moreover, if the power goes out or a refrigerator or freezer breaks, equipment breakdown coverage will make up for spoiled goods that might otherwise cause a huge dent in profits.

Related Insurance Policies

Businesses that rely on equipment and in-person operations will require multiple types of insurance to be fully protected during unforeseen circumstances. Below, we’ve outlined information on insurance policies that are related or similar to equipment breakdown coverage to help you understand the differences and determine whether these policies are also necessary for your business.

Equipment Breakdown Insurance vs. Business Interruption Insurance

While equipment breakdown insurance and business interruption insurance may cover similar expenses, these are two different types of coverage that apply in different scenarios. Equipment breakdown insurance covers repair or replacement expenses and loss of income when equipment unexpectedly breaks down. Business interruption insurance covers loss of income in the event of a peril, such as natural disaster, fire, or theft. The major difference between these two is that business interruption coverage does not cover the cost of repairs or replacement resulting from physical damage to property.

Equipment Breakdown Coverage vs. Commercial Property Insurance

Equipment breakdown coverage and commercial property insurance are similar in that they both protect your business from losses related to property damage. However, equipment breakdown coverage is specific to equipment-related damage and losses, while commercial property insurance covers property damage losses from theft, wind, lightning, fire, and other sources. Sometimes, you may see equipment breakdown coverage available as an extension to a commercial property insurance policy.

Equipment Breakdown Coverage vs. Boiler and Machinery Insurance

Historically, equipment breakdown insurance was called boiler and machinery (BM) insurance. Today, the updated name better reflects the coverage provided, as well as the broadening of coverage over time to include more types of equipment.

Equipment Breakdown vs. Tools & Equipment Coverage

Tools and equipment coverage protects contractors when tools that move from jobsite to jobsite become damaged or stolen. This type of policy also covers repairs to damaged tools. While these policies appear to serve a similar purpose, they are intended for different types of equipment. Equipment breakdown coverage is designed to cover large, stationary equipment that is essential to everyday business operations, while contractors tools and equipment coverage is typically designed for smaller, mobile tools and equipment used in construction and related businesses.

Equipment Breakdown Insurance Costs & Premiums

Costs and premiums for equipment breakdown insurance can vary greatly based on industry, business size, and numerous other factors. The cost and schedule of your premiums can also vary depending on the terms you agree to with your provider. That said, equipment breakdown insurance is a relatively inexpensive form of commercial insurance given the amount of protection it provides.

How Much Does Equipment Breakdown Coverage Cost?

Equipment breakdown insurance costs between $25 and $50 annually for every $50,000 in coverage. So, the typical business with around $1 million of equipment would pay between $500 and $1,000 annually, or a little less than $50–$100 per month.

Factors That Affect the Cost of Equipment Breakdown Insurance

Below, we have highlighted several factors that may influence the cost of your equipment breakdown insurance, and cause your total cost to be higher or lower than the average mentioned above. 

Size of Business & Income 

Larger businesses usually have more complex business operations; therefore, they will have more equipment to cover and are more likely to experience a covered event. Additionally, coverage for large businesses with higher income will require a higher premium because of the increased cost to replace that income. Finally, larger businesses often have more supplies and merchandise that can be affected by a breakdown, leading to higher product replacement costs if those items are damaged by an equipment failure.

Industry & Type of Equipment 

Additionally, certain industries and equipment types are more prone to breakdowns; therefore, these high-risk areas require higher premiums. Lastly, if an equipment breakdown is likely to spoil large amounts of inventory and products, or even a few pieces of expensive inventory, this can also lead to a more expensive premium.

Coverage Amount 

One of the most important factors determining the cost of an equipment breakdown policy is the amount of coverage provided. The higher the limit your business requires, the more expensive your premium will be. Conversely, if your business only needs a nominal amount of coverage, then its monthly payment will be significantly lower.

How to Determine the Right Amount of Coverage

When you are considering purchasing equipment breakdown insurance, there are several steps you should take to determine the right amount of coverage for your business: 

  1. Identify the equipment that requires coverage, and determine the value of that equipment. Consider all types of equipment that might be included within an equipment breakdown policy. 
  2. Determine the value of any products that may be spoiled during an equipment breakdown. This includes food and beverage products, but also chemicals or other inputs that need to be maintained at certain environmental conditions.
  3. Begin to think about your plan in the event of an equipment breakdown. Consider your potential income losses during an interruption caused by equipment breakdown, or any additional expenses you might incur in order to continue operating. 

Once you’ve considered the steps above, you can take this information to an insurance agent, who can help you more accurately determine the right amount of coverage for your business. You will not need a coverage limit that exceeds all of the potential expenses above, as it is highly unlikely that all of those losses would occur at one time. Instead, an agent can help you ensure that you have an adequate, but not excessive, coverage amount.

Comparing Equipment Breakdown Policies

There are several important factors to consider when shopping for equipment breakdown insurance. The importance of each of the factors will vary from business to business, so it’s important to evaluate your needs before getting started.

Coverage & Limits

When you compare policies, keep in mind that insurance policies, including equipment breakdown policies, are not one-size-fits-all. Some highly rated insurance providers might offer more coverage than your business needs. Similarly, a provider tailored for small businesses may not be adequate for your mid- to large-sized business. 

To determine how much coverage you’ll need, you should consider the following questions: 

  • What types of covered equipment does your business rely on? 
  • If this equipment broke down unexpectedly, could it lead to property damage, or damaged merchandise or supplies? If so, assess how much these damages could cost. 
  • Will you incur additional costs for an expedited repair process?
  • What kinds of measures are you taking to prevent damage and breakdowns of equipment before they occur? 

Cost

Even when coverage limits and scope are comparable, premiums and deductibles can vary, and can determine which policy best suits your business. If your business is still in its early stages, a monthly premium may be more manageable than an annual or semi-annual premium schedule. Conversely, more established businesses may prefer the simplicity of a less frequent payment schedule. 

Additionally, deductibles can be charged in different ways as well, as described above. When comparing policies with different types of deductibles, consider how different deductibles will impact an equipment breakdown scenario to decide which is the best fit for your needs.

Customer Experience

As a business owner, when you’re experiencing a crisis, you don’t want to run into problems with your insurance provider, too. Customer experience is a very important factor when choosing a carrier for your equipment breakdown coverage. 

You can find helpful information and feedback at the Better Business Bureau (BBB). Here, you can find out whether the company is BBB accredited, which means they have agreed to abide by the following standards: build trust, advertise honestly, tell the truth, be transparent, honor promises, be responsive, safeguard privacy, and embody integrity. The BBB profile will also display a rating, as well as customer reviews and complaints.

Another place to find information on customer experience is the National Association of Insurance Commissioners (NAIC) Complaint Index for the provider you’re considering. This source compiles data on the number of complaints filed for a company in comparison to other companies in the same sector. Together, both of these sources will allow you to gauge whether a certain company is likely to provide you with an excellent customer experience.

Financial Strength

Another important consideration when choosing an insurance provider is the company’s financial stability. When you need to file a claim, you want to be certain the company is guaranteed to pay out the money you’re owed.

AM Best, Moody’s, and Standard & Poor’s are three sources that assess insurance companies’ claims-paying ability and provide them with a Financial Strength Rating (FSR) based on the data reviewed. While this information is designed mainly for investors, it is also helpful information for potential customers.

The Best Equipment Breakdown Insurance Providers

After taking into consideration coverage, policy limits, cost, customer service, and financial strength, we selected the following companies for offering the best equipment breakdown insurance on the market.

Travelers (Best Equipment Breakdown Insurance Overall)

Best Equipment Breakdown Insurance Overall

Travelers Insurance offers a standalone equipment breakdown insurance policy, known as EnergyMax 21, which can be specialized for a range of business sizes and industries. 

Pros

  • Provides excellent standalone coverage options for equipment breakdown
  • Offers preventative services designed to reduce the risk that equipment breakdown will occur
  • Strong financial ratings from the major rating agencies

Cons

  • Limited information available online about its policy offerings; interested customers must contact an agent

Travelers Insurance, as it exists today, was formed from two insurance companies. The original Travelers was founded in 1864 as an accident insurance company, and St. Paul Fire and Marine Insurance Company was founded in 1855. These two companies merged in 2004 to form what is today known as The Travelers Companies, Inc.

Travelers’ EnergyMax 21 policy covers a variety of equipment types, including the traditional boiler and machinery coverage, as well as modern computer equipment, HVAC, refrigeration systems, and electrical equipment. Its coverage also includes turbines, solar panels, and related equipment. Travelers states that its coverage is suitable for a variety of businesses, from Fortune 500 companies, to local businesses, and even government and school facilities.

In addition to providing equipment breakdown policies, Travelers also provides preventative services, such as inspections for boilers and pressure vessels, risk control surveys that inform clients on the condition of their equipment, and the coordination of testing services.

One downside of Travelers is that the company provides very limited information about its policies on its website and doesn’t offer any way for potential customers to get quotes or sign up for coverage online. Instead, businesses will need to reach out to an agent to learn more about the various coverage options available and get a customized price quote.

That said, customers that do purchase a policy with Travelers tend to be highly satisfied with the experience. Travelers earned an NAIC complaint index of 0.11 for all policy types, which reflects significantly fewer complaints than its competitors relative to its market share. Travelers did not receive any complaints for commercial property insurance in the past year.

When in comes to reliability, Travelers Insurance has earned very strong financial ratings from multiple sources: 

  • AM Best awarded Travelers an A++ rating, indicating a “superior ability to meet their ongoing insurance obligations.”
  • Standard & Poor’s assigned Travelers an AA rating, indicating a “very strong capacity to meet financial commitments.”
  • Moody’s gave Travelers an Aa2 rating, indicating that their financial obligations are “high quality and subject to very low credit risk.” 

Because of its standalone policy options, preventative services and expertise, and strong financial ratings, we recommend Travelers Insurance as the Best Overall Provider of Equipment Breakdown Insurance.

Liberty Mutual (Best Runner-Up) 

Runner-Up Best Equipment Breakdown Insurance

Liberty Mutual offers equipment breakdown insurance in standalone or packaged policies. The company’s local agents will help you purchase coverage suited to your industry and location. 

Pros

  • Offers a selection of standalone or packaged policy options
  • Provides preventative services, similar to Travelers
  • Employees a dedicated team of underwriting and claims specialists for equipment breakdown coverage

Cons

  • Received slightly lower customer satisfaction ratings in recent years

Liberty Mutual is the 6th largest property and casualty insurance company in the world. It began in 1912 as a workers compensation insurance provider, and quickly expanded to auto insurance in 1918. Today, Liberty Mutual operates in 29 countries, offering a wide range of personal and commercial insurance products.

Liberty Mutual offers equipment breakdown insurance in packaged or standalone policies. Its coverage includes boilers and pressure vessels, computer systems, mechanical and electrical equipment, refrigeration equipment, HVAC equipment, and production machinery. Expenses covered include the cost of repair or replacement, lost income, extra expenses to continue operating, and the value of lost or spoiled inventory and supplies. The coverage included in its policies may vary between states; a local agent will provide more information about what coverage the policies in your area will provide.

In addition to coverage, Liberty Mutual also offers preventive services to mitigate the risk of equipment failure. Upon purchase of your policy, you can meet with a risk engineering consultant who will recommend ways to prevent equipment breakdown. 

If you must file a claim, you can begin the process online, or contact their 24/7 claims hotline. Liberty Mutual offers a team dedicated to equipment breakdown insurance including underwriting, risk engineering, and claims, to ensure that you are getting the best service possible throughout the entire process.

To get a quote, Liberty Mutual requires that you contact an independent agent or broker in your area. A local agent will be knowledgeable about the regulations in your area regarding equipment breakdown insurance, as well as risks common to your locality that can cause equipment breakdown incidents.

A potential downside of Liberty Mutual is that it received less favorable customer feedback recently than in years past. For example, in J.D. Power’s most recent Small Commercial Insurance Study, Liberty Mutual scored just below the category average. Similarly, data from the NAIC indicates that Liberty Mutual receives more complaints than average based on its size. That said, when focusing on its commercial property lines specifically, Liberty Mutual actually performs better than many of its competitors with respect to the NAIC complaint statistics. Liberty Mutual is also a BBB-accredited business with an A+ rating.

When it comes to financial strength, Liberty Mutual outperforms many competing insurers; customers should feel confident in the company’s ability to cover claims. 

  • AM Best assigned Liberty Mutual an A rating, indicating an “excellent ability to meet their ongoing insurance obligations.”
  • Standard & Poor’s assigned Liberty Mutual an A rating, indicating a “strong capacity to meet financial commitments” However, this rating also notes that they may be “somewhat susceptible to economic conditions and changes in circumstances.”
  • Moody’s assigned Liberty Mutual an A2 rating, meaning that they consider their financial obligations to be “upper-medium-grade and subject to low credit risk.”

Because of its packaged and standalone options, preventative services, dedicated equipment breakdown team, and BBB accreditation, we recommend Liberty Mutual as a Runner-Up in Equipment Breakdown Insurance.  

Chubb (Best for Large Business; Custom Policy Options)

Best for Policy Customization

Chubb offers equipment breakdown coverage in packaged or standalone policies that can be customized to suit your business’s needs.

Pros

  • Standalone or packaged policies with a higher degree of flexibility than those offered through other insurance providers
  • Trained and specialized claims processors offer unmatched customer service
  • Superior financial strength ratings

Cons

  • Chubb policies tend to be more expensive than similar policies from competing insurers

Chubb’s origins date back to 1792 with the founding of the Insurance Company of North America (INA), which was the United States’ first stock insurance company. Today, Chubb is a property and casualty insurance company that operates in 54 countries and territories; it is the largest publicly-traded company of its kind. This long history and depth of experience in the industry make Chubb a well-established and stable insurance provider.

Chubb’s equipment breakdown coverage offering is one of the most customizable on the market. Chubb allows businesses to tailor the policy to suit specific needs, which might include setting higher or lower limits on the policy overall, setting higher or lower limits for certain types of equipment, and including or not including various types of equipment, among other policy adjustments. For example, a food manufacturing facility could customize the policy to include a higher limit for food spoilage specifically.

Another unique aspect of Chubb’s equipment breakdown insurance is the “Green Standards” feature. This covers expenses for restoring LEED-certified standards and repairing or replacing energy-efficient equipment when a covered event occurs. Moreover, their “Safety Feature” incentive increases your policy’s limits by 25% if you use the additional coverage to purchase safer equipment or add safety features when repairing existing equipment.

Like many of its competitors, Chubb offers preventative services; however, in our experience, Chubb’s additional services tend to go above and beyond those offered by other providers, which is one of the reasons its policies tend to also be more expensive. Chubb also has an in-house equipment breakdown claims unit, meaning that you will be connected with an experienced specialist to walk you through the process if you ever need to file a claim. In its effort to provide the best customer service, Chubb will often have the same risk engineer assigned to the business handle its claim as well.

Small businesses can start a quote online, while larger organizations must contact a regional agent to get a quote. While some business owners may find this inconvenient, the customers that Chubb targets will typically want to communicate directly with an agent in setting up and customizing their policies.

In addition to its strong customer service, Chubb has earned excellent financial ratings from multiple sources: 

  • AM Best awarded Chubb an A++ rating, indicating “superior ability to meet their ongoing insurance obligations.”
  • Standard & Poor’s assigned Chubb an AA rating,  indicating a “very strong capacity to meet financial commitments.”
  • Fitch rated Chubb AA-, which indicates a “very strong capacity for payment of financial commitments.”

Because of its highly customizable policy options, expert claims and preventative services, and strong financial ratings, we recommend Chubb as having the Best Equipment Breakdown Coverage for Large Businesses and the Most Customizable Equipment Breakdown Policy

CNA Insurance (Most Affordable Equipment Breakdown Coverage) 

Most Affordable Equipment Breakdown Coverage

CNA Insurance offers standalone equipment breakdown policies, and it includes equipment breakdown coverage in several packaged policies.

Pros

  • Equipment breakdown coverage included with other policies, such as its commercial property insurance and business owners policy
  • Strong financial ratings and customer service

Cons

  • Targets low- to medium-risk customers, making CNA not a good choice for high-risk businesses

CNA is a large property and casualty insurance company that has existed for more than 120 years. CNA has operations in the United States, Canada, and Europe, and specializes in insurance products exclusively for businesses.

CNA’s standalone equipment breakdown coverage offers basic features, including repair or replacement costs, damage caused by a breakdown, loss of spoiled inventory and supplies, and losses related to computer and data equipment. In addition, its policy also covers civil authority losses when a civil authority restricts access to the premises as a result of a covered equipment breakdown, and ingress-egress losses when access to the premises is blocked as a result of a covered event. Lastly, this policy covers loss adjustment expenses, off-premises equipment coverage, and business income and extra expenses coverage.

Like other insurers included in this guide, CNA offers a dedicated team that specializes in equipment breakdown coverage, from underwriting to risk management and claims processing. However, one thing unique about CNA is that the company includes equipment breakdown coverage in many of its other commercial policies without requiring the addition of an endorsement or rider.

One potential downside of CNA is that its policies are designed for low to moderate-hazard industries that are service-oriented, including manufacturing, real estate, schools, religious institutions, retail, restaurants, and government. If your business operates in a high-risk industry, CNA might not be a good fit.

For those customers that do work with CNA, they tend to be highly satisfied with the service they receive. CNA’s Complaint Index as measured by the NAIC is well below average, meaning that CNA receives far fewer complaints than its competitors after adjusting for customer volume. Additionally, CNA earned the following strong financial ratings:

  • AM Best gave CNA an A rating, indicating “excellent ability to meet their ongoing insurance obligations.”
  • Standard & Poor’s assigned CNA an A+ rating, indicating “strong capacity to meet financial commitments, but somewhat susceptible to economic conditions and changes in circumstances.” 
  • Moody’s assigned CNA and A2 rating, meaning that they consider financial obligations to be “upper-medium grade and subject to low credit risk.”

Because many of CNA’s existing policies already come with equipment breakdown coverage, we recommend CNA as one of the most affordable options.

Nationwide (Best Endorsement Option) 

Best Equipment Breakdown Endorsement

Nationwide offers equipment breakdown insurance as an endorsement on its Business Owners Policy, which combines commercial property insurance, general liability, and business income coverage into a single policy. 

Pros

  • Equipment breakdown coverage offered as an endorsement on its BOP
  • Strong customer satisfaction ratings on a recent J.D. Power survey

Cons

  • No standalone equipment breakdown policy offered 

Nationwide was founded in 1925 as a small auto insurer named Farm Bureau Mutual Auto Insurance. Over the past 90 years, the company has expanded coverage to fire insurance, then property insurance, life insurance, and commercial insurance. During that time, it also expanded coverage from a few states to national coverage, and was renamed to Nationwide in 1955 to reflect this expansion. Nationwide was also the first insurance company to establish a 24-hour claim reporting service.

Nationwide’s equipment breakdown coverage includes but is not limited to the following events: power surges, mechanical malfunction, and operator error. Types of equipment covered include mechanical, electrical, HVAC, and computer equipment. Covered expenses include equipment repair, loss of income, and lost or damaged inventory and materials.

Purchasing equipment breakdown coverage as an endorsement on a BOP can be beneficial for small business owners looking to save money by reducing the number of standalone insurance policies held. However, for businesses that rely heavily on covered equipment, a standalone policy may provide more adequate coverage.

To get a quote, potential customers can start one online, call to get a quote, or search for a business agent in their area. Nationwide allows customers to file a claim online, over the phone, or through their insurance agent. And as mentioned above, the company’s claims hotline is available 24/7.

With regards to customer satisfaction, Nationwide recently placed third in J.D. Power’s Small Commercial Insurance Study—one that takes into account policy offerings, claims, billing, payments, and price. Furthermore, for its commercial property products, Nationwide receives fewer complaints than its competitors relative to market share.

Nationwide has earned strong financial strength ratings from all the major agencies, including an A+ from AM Best, an A+ from Standard & Poor’s, and an A1 from Moody’s. Customers should have little concern about Nationwide’s ability to meet its financial obligations.

We recommend Nationwide as the best provider for businesses looking for an endorsement on an existing policy, rather than standalone equipment breakdown insurance.

Frequently Asked Questions

What is equipment breakdown coverage?

Equipment breakdown coverage is a form of commercial insurance that provides financial protection for businesses in the event that critical equipment fails. Examples of such equipment include electrical systems, machines used in manufacturing, HVAC components, and computer equipment. In addition to providing funds for replacing or repairing the damaged items, equipment breakdown insurance also reimburses for lost income, damaged inventory, and liability-related expenses.

What does equipment breakdown coverage cover?

Equipment breakdown insurance covers the costs associated with equipment failures that result from internal factors like power surges, electrical shorts, motor burnout, and operator error. It does not cover breakdowns that result from normal wear and tear or external factors like natural disasters. The primary costs covered are those related to the repair or replacement of the damaged equipment, lost income, damaged inventory, and other property damage.

What is not covered by equipment breakdown coverage?

Equipment breakdown coverage does not cover breakdowns that result from normal wear and tear, natural disasters, extreme weather, equipment testing, or computer viruses.

What is the difference between equipment breakdown and boiler and machinery insurance?

Boiler and machinery insurance was the original name for equipment breakdown insurance that was used before the category of insurance expanded to provide coverage for a broader set of items. Although the terms are sometimes still used interchangeably, the newer term “equipment breakdown insurance” more accurately describes what is covered by these types of policies.

References

https://business.libertymutualgroup.com/business-insurance/Pages/Coverages/Equipment-Breakdown-Insurance.aspx
https://content.naic.org/
https://gocodes.com/equipment-maintenance-statistics/
https://newsroom.fmglobal.com/releases/equipment-breakdown-responsible-for-nearly-one-third-of-all-property-related-losses-in-2018-reports-fm-global
https://pos.toasttab.com/blog/on-the-line/average-restaurant-profit-margin
https://smartestdollar.com/cyber-insurance
https://taraenergy.com/blog/power-surge-how-they-happen/
https://www.ambest.com/ratings/guide.pdf
https://www.assuredstandard.com/equipment-breakdown/
https://www.bbb.org/bbb-accreditation-standards
https://www.buildersshield.com/equipmentinsurance/
https://www.chubb.com/us-en/business-insurance/equipment-breakdown-services.html
https://www.chubb.com/us-en/business-insurance/equipment-breakdown.html
https://www.cna.com/web/guest/cna/products/equipment-breakdown
https://www.coverwallet.com/general/equipment-breakdown-insurance
https://www.davemooreinsurance.com/news-and-resources/what-is-building-ordinance-or-law-coverage/
https://www.hse.gov.uk/toolbox/pressure.htm
https://www.irmi.com/articles/expert-commentary/contingent-business-interruption-getting-all-the-facts
https://www.irmi.com/term/insurance-definitions/brands-and-labels-endorsement
https://www.irmi.com/term/insurance-definitions/utility-service-interruption-coverage
https://www.moodys.com/sites/products/productattachments/ap075378_1_1408_ki.pdf
https://www.munichre.com/hsbcanada/en/knowledge-centre/mini-webinars/why-do-i-need-course-of-construction-equipment-breakdown-coverage.html
https://www.nationwide.com/business/insurance/equipment-breakdown/
https://www.nationwide.com/lc/resources/small-business/articles/what-is-a-business-owners-policy
https://www.selectins.net/blog/do-contractors-need-equipment-breakdown-coverage.aspx
https://www.spglobal.com/ratings/en/about/intro-to-credit-ratings
https://www.statefarm.com/simple-insights/residence/are-power-surges-damaging-your-electronics
https://www.thehartford.com/commercial-property-insurance
https://www.thespruce.com/what-causes-short-circuits-4118973
https://www.travelers.com/business-insurance/boiler-machinery/equipment-breakdown-coverage
https://www.travelers.com/risk-control/specialties/equipment-breakdown

By clicking the above links, you will go to one of our insurance partners. The specific companies listed above may not be included in our partner’s network at this time.