23 March 2021

Avoid shutdown losses if your machinery or equipment fails

Almost every business relies on equipment, from desktop computers through to refrigeration, manufacturing plant and heavy machinery. They’re essential tools and if they’re not working then we can’t either. Businesses need contingency for these risks, and that’s what machinery and equipment breakdown insurance is for.

Machinery and equipment breakdown insurance is generally part of a business insurance package, and as high dependency assets for a businesses, it’s important to check that you’re adequately covered with the protection your business needs. Downtime to business will damage not only revenue but also business relationships and reputation.

Businesses can gain support to address these equipment risks in both the short and long term. This may mean accessing fast-tracked arrangements for repair or replacement and gaining claims support to know that the costs involved will be covered.

manufacturing-assembly-line-machinery-equipment-insurance-cover

What type of assets is machinery and equipment insurance for?

From professional offices to factories, there is cover available for a broad range of machinery and equipment relied on in these business environments, usually including (but not limited to): 

  • engines
  • water pumps
  • boilers
  • generators
  • electrical equipment
  • manufacturing plant
  • heating, cooling and ventilation systems
  • escalators and elevators
  • ovens and food processors
  • computers and telecommunications equipment
  • business equipment (photocopiers, fax machines, printers, etc)
  • security systems and fire safety
  • point of sale devices.

What problems are supported by machinery and equipment breakdown insurance protection?

The incidents equipment assets are covered for are typically breakdowns due to electrical issues; external factors such as temperature, excessive moisture or contamination; or problems relating to the running of the equipment, such as vibration or misalignment. (The theft of or damage to equipment from other causes like fire are not part of this type of insurance and would normally be included in your business property damage cover.)

Most importantly machinery and equipment breakdown insurance provides cover for

    1. the cost repairing or replacing your faulty equipment
    2. financial losses due to delays or having to suspend operations.

Businesses that benefit from machinery and equipment insurance

Business sectors that need machinery and equipment breakdown cover include

  • businesses in offices

  • manufacturers

  • healthcare facilities

  • retailers

  • hospitality

  • auto repairs

  • construction contractors

  • transport operators

  • professional service providers.

“An insurance broker who’s experienced in your industry sector can help with covering your machinery and equipment exposures, and estimating the costs that might be involved. This helps you ensure that you can retain business continuity and don’t let your business partners down, and that protects your reputation.”   


Stephen Elms, Gallagher Head of Food Production


Machinery and equipment insurance inclusions to carefully consider

It’s important to get insurance cover that’s adequate and appropriate for your type of operation by considering the limits and conditions that are involved.

  • If your business is expanding or evolving ask if you’re able to amend the policy by adding additional items.
  • Check the requirements for maintenance of your equipment, and how often.
  • Be very clear on the basis for claims payments. The replacement value, market value or agreed value of your equipment may depend on the age of the item(s) insured. You want to ensure that your insurance cover enables you to gain suitable and optimal equipment replacement/s..
  • Consider the timing and cost involved in obtaining replacement parts and if repairs might cost more than replacement.

If the equipment you use is expensive, highly specialised and absolutely critical to your business you may be better protected by industrial special risks insurance which can be a more flexible option for high value items.

Get advice from a risk expert for business insurance

A broker who understands both your business and your industry can guide you in obtaining exactly the right machinery and equipment cover for your business.

Connect with an expert

 

Further reading

Manufacturing insurance

Small business insurance

How to get your business sums insured right


Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient’s industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers’ control.

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