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Insurance Coverage That Could Save Your Business – Part 2

By September 2, 2014May 21st, 2020Insurance


Some types of insurance are required to operate legally, while others are optional

Of course, the coverage a business needs depends on the type of company you run and the number of employees who work there. There are also  some optional insurance coverage business owners should always consider.

Here is the second of three “optional” insurance coverages that business owners often leave out of their insurance package which could literally save the business in a time of crisis.

# 2 – Equipment Breakdown Coverage

Take a walk through your business and look at all the big pieces of equipment that you would not like to replace out of pocket. All it takes is one person misusing the equipment, improper maintenance or a power surge that could wipe out your entire computer system.

You might mistakenly believe that your business property/casualty insurance will cover the damage.  However, business property/casualty policies only cover damage to your equipment from “external” causes, such as a fire, a flood or a tree falling on your roof. Those policies do not cover damage from “internal” causes such as mechanical failure, electrical short circuit or “arcing” (faulty wiring or motor burnout).

Losses related to equipment breakdowns are covered by aptly named “equipment breakdown” insurance. Equipment breakdown insurance (sometimes sold under the name of “boiler and machinery insurance”) is an increasingly important part of any sound small-business insurance package for several reasons:

  • New technology, such as fragile electronic and computerized equipment, is subject to breakdowns that can be more frequent and costly than traditional mechanical equipment.
  • New business practices, such as Internet marketing and “just in time” inventory, make all businesses more dependent than ever on computer systems.
  • Critical business information often exists only on the Internet, or in online databases, that cannot be access during periods of equipment breakdown.
  • Employees are now traveling with many types of equipment that were once permanently attached to a fixed location, so breakdowns often occur in places other than the ones insured under traditional property/casualty policies.

Equipment breakdown coverage pays the cost to repair or replace equipment damaged by a covered accident. It can also cover business income losses that stem from an equipment breakdown and the additional costs you incur to speed restoration of business operations.

Most insurers are building equipment breakdown coverage into their commercial property packages. If you have an older policy, however, you may have to review it with your insurance agent to make sure it covers the high-tech equipment upon which your business now relies. If it doesn’t, maybe it’s time for an upgrade. 

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