As a savvy business owner, there’s no doubt that you’ve looked into basic commercial insurance coverage and its cost. So you may recognize the two most common business insurance policies: general liability and property damage.
Depending on the type of business you own, there’s one important thing you may have missed in reviewing the options available. That is, unless your electrical and/or mechanical equipment is damaged by one of the general perils specifically listed on your property damage policy, you won’t be covered if you have to replace or repair it.
A few examples of commonly covered perils are events such as fire, wind, hail, smoke, and civil unrest. However, the average policy usually doesn’t include any coverage for mechanical breakdown. And not having the proper endorsement to properly protect your equipment could shut down your business for days or weeks, during which time your income and profits could all but cease.
Who needs it?
If the extent of your business’s equipment is a small cash register and a phone, and/or if you rent a space where the owner provides maintenance, heat, and air, you may find that you’re not going to need mechanical breakdown coverage as an essential part of your commercial insurance coverage, providing, of course, you have saved up the money towards replacing or repairing your cash register and phone in the event of a non-covered loss.
Those business owners who should be especially concerned about equipment breakdown coverage are companies that have any or all of the following: manufacturing equipment; more than one computer; refrigeration; boiler systems; cooking equipment; generators; motors; fire and security systems.
Equipment breakdown coverage is important whether you own or lease the equipment. To protect themselves, leasing companies will often require you to carry this protection, not unlike an auto lender that insists you carry comprehensive and collision coverage on your auto insurance policy when you’re financing a car.
This policy will cover labor and other costs of repairing equipment, not just replacing it. There are other residual losses that may occur due to the breakdown that are also covered. For example, if you own a restaurant and your freezer breaks, causing you to lose thousands of dollars’ worth of frozen food, that would be covered.
Clean-up services may also be covered if the breakdown causes a mess. One of its greatest benefits is that it will also cover any loss of business you experience while getting the equipment repaired or replaced.
Some insurance companies will offer equipment breakdown as a separate policy, or it can be added as an endorsement – a special addition – to your existing commercial insurance policy.
Ask your insurance professional if there are differences in the coverage limits and options, so you can make a well-informed decision about which option would be better for you.
Prepare and protect the flow of your business to ensure minimal interruption if something or, as sometimes happens, everything breaks down. Your business account (and your personal checking account) will thank you.