Boiler and machinery insurance
Boiler and machinery insurance covers a company’s machinery or equipment. It helps pay for repairs or replacement of damaged equipment in the event of a sudden failure, as well as financial losses to the business.
What is boiler and machinery insurance?
Boiler and machinery insurance protects against costs related to the unexpected breakdown of machinery and equipment at a place of business.
While commercial property insurance often covers many of the same items as boiler and machinery insurance, commercial property claims only apply to covered perils, such as vandalism, fire, lightning, theft, and windstorms. To be compensated under your boiler and machinery policy, the damage would stem from something internal, like a power surge, motor burnout, or overpressure.
It can be bought as a standalone commercial insurance policy, or it can be added as a rider or endorsement to your existing small business insurance, such as a commercial property policy, business owner’s policy (BOP), or commercial package policy (CPP).
What does boiler and machinery insurance cover?
Boiler and machinery insurance is an important form of insurance for many small businesses. That’s because it covers not only production machinery, but also more common items, including office equipment like computers and telephones, electrical systems, HVAC systems, generators, elevators, refrigerators, and much more.
It handles claims for these three types of losses:
Direct physical damage
If you experience a sudden malfunction due to something like a mechanical breakdown, electrical power surge, accident, or even operator error, your boiler and machinery insurance will kick in to pay for repairing or replacing whatever was involved.
Consequential damage
If the equipment breakdown harmed surrounding structures, materials, or other property—including a third party’s—then your boiler and machinery insurance would cover the costs related to fixing those.
Business interruption and lost income
Sometimes, an equipment malfunction could force business operations to temporarily shut down. Or it could require extra employees to get your operations up and running again. It could also mean throwing away products that were ruined due to the accident.
All of these business interruption scenarios result in a loss of income, and boiler and machinery insurance would reimburse for that as well.
How is boiler and machinery insurance different from equipment breakdown coverage?
Boiler and machinery insurance is also referred to as equipment breakdown coverage. The distinction of “boiler and machinery” dates to the mid-1800s, when steam-powered machinery was the norm. Nowadays, businesses use many kinds of power sources to keep their equipment running, so the more modern and generalized description, “equipment breakdown coverage” emerged.
Although antiquated, “boiler and machinery insurance” is still used at times, and the two terms are interchangeable.
How much does boiler and machinery insurance cost?
The cost of a boiler and machinery insurance policy depends on what your business does and what your needs are. Some factors include:
- Industry and location
- Business income
- Number of employees
- How much equipment you have, its worth, and how old it is
- Your ability to provide equipment maintenance records
- Coverage limits and deductibles
A risk management analysis may quickly reveal that the expense of adding this type of coverage to your business insurance is a smart choice.
That’s because the types of equipment included in the policy are often very expensive to repair or replace.
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Examples of incidents covered by a boiler and machinery policy
There are many scenarios where a boiler and machinery policy would benefit a small business. Below are some examples.
| If this happens... | Then boiler and machinery insurance would pay for... |
|---|---|
The production line of a manufacturer fails due to a mechanical breakdown... | Repairing the affected manufacturing equipment and any losses due to the business interruption. |
A hotel or nursing home suffers an electrical system breakdown... | Repair of any issues with the electrical system. It could also reimburse for the extra expense of generators if they were necessary to keep the facility safe and running. |
The air conditioning handlers in a cannabis greenhouse fail... | Fixing the HVAC system and also for the loss of any ruined plants. |
A power surge destroys a server in a data center cluster... | New hardware and business loss while the server is inoperable. |
The refrigeration system of a food manufacturer suddenly breaks... | Repairing or replacing any affected refrigerators or freezers, as well as compensating for any spoiled product. |
A malfunction in a fire suppression system leads to sprinklers turning on in a warehouse... | Replacing all the ruined product and any harmed equipment or structures caused by the water damage. |
A worker at a brewery that's not familiar with the equipment lets the water in a steam boiler drop too low. As a result, it overheats and explodes... | Repairing or replacing the boiler, the loss of any beer that was ruined, and possibly surrounding third-party property damage by the explosion. |
Common boiler and machinery insurance exclusions
Boiler & machinery insurance only covers equipment that suddenly stops working. It's not meant to pay for breakdowns that are associated with normal wear and tear or due to poor maintenance.
Additionally, while equipment breakdown insurance does include protection for technology like computers, it typically only applies to hardware. Software and data most likely won't be covered. To protect your business in these areas, you should get cyber insurance or electronic data processing (EDP) insurance.
Does a manufacturer’s warranty cover my equipment failure?
While manufacturers often do provide a warranty for their products, there's usually a time element involved. If you fall outside that window, your warranty won't be honored.
Additionally, manufacturer warranties often have a lot of limitations. Most don't handle anything beyond the replacement or repair of their product. So, any collateral damage that results from the equipment malfunctioning would be your responsibility. Boiler and machinery insurance would be able to help cover that.
Another consideration is determining what caused the breakdown in the first place. One survey found “nearly half of all equipment-breakdown losses had a significant ‘human element’ impact or influence.” Typically, operator error precludes a warranty being honored. However, with a breakdown and machinery policy, there’s a good chance your claim would be allowed.
How do I get boiler and machinery insurance coverage?
Protecting your business’s valuable machinery and equipment starts with a simple online application. An insurance agent can help you find the right boiler and machinery coverage at the best price.
Insureon’s free consultations allow you to compare quotes from the top U.S. insurance companies. Once you find the equipment breakdown coverage that fits your needs, your policy or endorsement can begin almost immediately.
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