Do You Need Insurance if Your Equipment Is Covered By A Warranty?

Companies rely on many tools and equipment to run seamlessly and generate revenue continuously. In that scenario, one of the primary responsibilities of the business owners is to ensure the proper functioning of these machines. In many businesses, most of the equipment you invest in are interdependent, which means that one malfunction can bring the entire system down and stall productivity. Despite the equipment being covered by warranties, separate equipment breakdown insurance is recommended for these machines that play a significant role in running the businesses. 

For one, the warranties only cover some specific types of damages, excluding the rest. Hence, it’s essential to opt for equipment breakdown insurance to recoup losses due to a malfunction, even when the machine is under warranty.

Are you wondering what extra benefits the insurance cover will provide? You’re at the right place for answers. Read on!

What is the equipment breakdown coverage?

Formerly known as the boiler and machinery insurance, the equipment breakdown coverage is a kind of property insurance that covers the financial losses incurred by a breakdown of equipment in a variety of different conditions. It needs to be mentioned here that the insurance not only covers individual machinery but also entire system operations like server malfunction, power failure in the building, damaged refrigeration units, and more.

Let’s try to understand the risks that all the vital equipment is subjected to and get an idea of the insurance benefits that you can receive in the event of a malfunction or a complete breakdown.

Boilers and pressure vessels – This kind of insurance used to be mainly about boliers and pressure vessels. Mostly used to generate heat, sterilize products, cook, and boil water, any damage to the vessels can stop business operations completely, not to mention the risk of physical damage. The insurance will cover these expenses, as well as the costs of renting equipment from other sources temporarily.

Electrical systems and sustainable energy systems – A breakdown in the electrical systems could generate high losses and the entire building may lose power, thus stalling all work. The equipment breakdown insurance covers all damages related to the costs of breakdown like the expenses involved in renting a generator, shifting offices or relocating tenants, in case the breakdown happens on residential property. This is because the service interruption of the building owner is a key factor in the loss of income.

Many businesses are adopting green technologies like solar power generators and more to reduce their carbon footprint. However, if damage to such systems leads to business interruptions and high losses, the equipment breakdown coverage will make sure you get your business up and running soon.

HVAC, Refrigeration, and air conditioning – A lot depends on air-conditioning and refrigeration, and damage to these components causes a series of problems for the business owner besides replacement and repair costs. The equipment breakdown insurance will cover for the losses incurred due to spoilage, as well as the expenses of repair and replacement, if necessary.

Computers and telecom infrastructure – Today, almost all businesses are dependent on technologies, and any damage to these systems can bring about huge disruption in the operations. Replacement costs can go through the roof, not to mention the time required to replace the large systems like servers, telecommunication equipment (along with MRI machines and CT scan systems in the healthcare space). The equipment breakdown insurance will cover these expenses.

Machines and manufacturing systems – It’s difficult to find a building that’s devoid of mechanical equipment like elevators, escalators, back-up generators, compressors, and the list goes on. Damage to such equipment can cause problems for the residents and workers, thus needing repairs immediately. Production systems like robotics, manufacturing equipment, food processing or other machinery have a direct influence on business operations and revenue. So, equipment insurance will cover the expenses that may arise due to malfunction. As such damages may result in business interruptions and loss of income, the insurance will cover the expenses of repair or replacement.

How equipment insurance is different from warranties

The key difference between equipment warranties and insurance is the former emphasizes the cause of malfunction and doesn’t cover operator mishandling, while the latter is more flexible in this regard. Moreover, the warranties are valid only within a specified time frame and have to be renewed after that period gets over. Also, as we have mentioned, warrantees cover specific conditions and extend only to the equipment itself. They, almost never, extend to the economic impact caused due to the malfunction of the equipment.

Equipment insurance should help you cover for the losses your business suffers while the machine was being repaired or replaced.

So, you see how important it’s for your business to get equipment insurance, even when the machines are under warranty?

Which industries can benefit from equipment insurance?

While most industries use expensive equipment these days, some depend entirely on their machinery for day-to-day business operations. The need for buying equipment insurance is greater for the businesses listed below:

•    Tech-driven companies – High-end technologies like computers, servers, and other electronic equipment are used regularly for seamless business operations. If one system breaks down, thousands of dollars could be at stake. So, it’s better to stay prepared by opting for equipment insurance.

•    Manufacturing businesses – Most goods here are manufactured by machines, and even one of them breaking down can lead to huge losses. Insurance could, not only, recoup those losses but also cover the expenses of getting the equipment repaired or replaced.

•    Restaurants and fast food businesses – Proper refrigeration, cooking, and storing food are indispensable to restaurants, diners, and fast food joints. If any of the equipment breaks down, your operations will suffer, and you stand to face huge losses as expensive food goes bad. Equipment insurance will protect you against such mishaps.

•    Automobile repair shops – The handy tools and electrical equipment used in these places can break down at any time. If you have a warranty, you may be able to repair/replace them for free, but the insurance will also help reimburse the losses your business suffers during the period of malfunction.

•    Clinics and healthcare centers – Every healthcare center and clinic requires a range of costly equipment to diagnose and treat various ailments. A simple malfunction can give out wrong readings and false diagnoses, which will be detrimental to the health of the patient. Having equipment insurance can minimize such issues and also help you provide a more consistent level of care.

That apart, business equipment insurance is useful for convenience stores, gyms, retail stores, educational institutions, and more. This insurance will act as additional protection for warranted machinery and maintain the flow of business. Talk to a reliable insurance agency today and consider getting equipment insurance as soon as possible.

*This is for information purposes only, please refer to the respective policies for the full terms, conditions, and exclusions.  Always read the policy language carefully and consult with your insurance professional.