Boiler and machinery insurance, sometimes referred to as “equipment breakdown” or “mechanical breakdown coverage,” provides coverage for the accidental breakdown of boilers, machinery, and equipment. This type of coverage usually will reimburse you for property damage and business interruption losses. For example, this coverage would cover fire damage to computers.
How Does Boiler and Machinery (BM) Insurance Work?
Equipment breakdown insurance, which is traditionally known as boiler and machinery (BM) insurance, provides coverage for damage or loss resulting from unexpected mechanical breakdowns, electrical power surges, or other qualifying types of failure.
It will pay to repair or replace the covered equipment or machinery, and it also generally covers ensuing property damage and business interruption costs, including lost income and extra operation expenses.
Equipment breakdown insurance can help pay to repair or replace the freezer and grill, to rent the additional freezer, and to cover the lost income until the restaurant can open again – all up to the coverage limits.
This coverage can be added to a commercial property insurance policy, a business owner’s policy (BOP), or a commercial package policy (CPP). It can also be obtained as a stand-alone policy.
When a claim occurs, the process typically involves an investigation by the insurance company to determine the cause of the equipment failure and the extent of the damage or loss. The policyholder may need to provide documentation, such as repair invoices or proof of lost income, to support their claim.
What Doesn’t Boiler and Machinery (BM) Insurance Cover?
While equipment breakdown insurance is designed to protect businesses from financial losses related to sudden, internal breakdowns, there are some types of losses that are typically excluded from coverage. Here are some of the most common exclusions that may apply to this type of coverage:
- Wear and tear. Most policies exclude damage resulting from normal wear and tear, as this is considered a maintenance issue.
- Rust and corrosion. These types of damages may be excluded from coverage, as they can often be prevented through proper maintenance and inspections.
- Cyber attacks. Equipment breakdown insurance generally doesn’t cover losses related to cyber attacks, which can cause software failure or system breakdowns.
- Earthquakes and floods. Damage resulting from earthquakes and floods is typically excluded from coverage under a standard equipment breakdown policy, although you may be able to purchase separate insurance to cover these risks.
- Intentional acts. Damage resulting from intentional acts by employees may be excluded from coverage.
Additionally, the standard coverage provided by a commercial property insurance policy will pay for any damage to equipment or machinery caused by fire, theft, vandalism, lightning, or other covered peril.
Who Needs Boiler and Machinery (BM) Insurance?
Equipment breakdown insurance is important for businesses that rely on machines, electrical systems, or other equipment to operate. This type of insurance can help these kinds of businesses recover quickly and minimize the financial impact of equipment failures caused by unexpected mechanical breakdowns or power surges.
Examples of organizations that would find equipment breakdown insurance especially useful include:
- Manufacturing facilities
- Hospitals and health care facilities
- Hotels and resorts
- Educational institutions
- Restaurants and food service businesses
- Commercial buildings
- Retail stores and shopping centers
- Agricultural businesses
- Construction companies
How Much Does Boiler and Machinery (BM) Insurance Cost?
The cost of equipment breakdown insurance can vary depending on several factors, including:
- Industry and business type. The type of business and industry you operate in can affect the cost of your insurance. Businesses that use more complex and expensive equipment may have higher premiums.
- Equipment value and age. Newer equipment may have lower premiums than older equipment, as it is generally less likely to break down and easier to determine the cause.
- Equipment maintenance and safety records. Insurers may ask for records of equipment maintenance and safety protocols to assess the likelihood of a breakdown.
- Deductibles and coverage limits. Higher coverage limits and lower deductibles generally mean higher premiums.
- Past claims history. A business with previous losses on its record may be assigned higher rates.
How To Buy Boiler and Machinery (BM) Insurance
You can buy equipment breakdown insurance through a variety of channels, including insurance agents, insurance brokers, and online insurance marketplaces. You can also approach your current provider to see what options it provides.
Coverage can be obtained through a stand-alone policy or as an endorsement to a commercial property insurance policy, business owner’s policy (BOP), or commercial package policy (CPP).
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