Boiler and machinery insurance

Boiler and machinery insurance protects against costs related to the unexpected breakdown of machinery and equipment at a place of business.

While commercial property insurance often covers many of the same items as boiler and machinery insurance, commercial property claims only apply to covered perils, such as vandalism, fire, lightning, theft, and windstorms. To be compensated under your boiler and machinery policy, the damage would stem from something internal, like a power surge, motor burnout, or overpressure.

It can be bought as a standalone commercial insurance policy, or it can be added as a rider or endorsement to your existing small business insurance, such as a commercial property policy, business owner’s policy (BOP), or commercial package policy (CPP).

Boiler and machinery insurance is an important form of insurance for many small businesses. That’s because it covers not only production machinery, but also more common items, including office equipment like computers and telephones, electrical systems, HVAC systems, generators, elevators, refrigerators, and much more.

It handles claims for these three types of losses:

If you experience a sudden malfunction due to something like a mechanical breakdown, electrical power surge, accident, or even operator error, your boiler and machinery insurance will kick in to pay for repairing or replacing whatever was involved.

If the equipment breakdown harmed surrounding structures, materials, or other property—including a third party’s—then your boiler and machinery insurance would cover the costs related to fixing those.

Sometimes, an equipment malfunction could force business operations to temporarily shut down. Or it could require extra employees to get your operations up and running again. It could also mean throwing away products that were ruined due to the accident.

All of these business interruption scenarios result in a loss of income, and boiler and machinery insurance would reimburse for that as well.

Boiler and machinery insurance is also referred to as equipment breakdown coverage. The distinction of “boiler and machinery” dates to the mid-1800s, when steam-powered machinery was the norm. Nowadays, businesses use many kinds of power sources to keep their equipment running, so the more modern and generalized description, “equipment breakdown coverage” emerged.

Although antiquated, “boiler and machinery insurance” is still used at times, and the two terms are interchangeable.

There are many scenarios where a boiler and machinery policy would benefit a small business. Below are some examples.

Boiler & machinery insurance only covers equipment that suddenly stops working. It's not meant to pay for breakdowns that are associated with normal wear and tear or due to poor maintenance.

Additionally, while equipment breakdown insurance does include protection for technology like computers, it typically only applies to hardware. Software and data most likely won't be covered. To protect your business in these areas, you should get cyber insurance or electronic data processing (EDP) insurance.

While manufacturers often do provide a warranty for their products, there's usually a time element involved. If you fall outside that window, your warranty won't be honored.

Additionally, manufacturer warranties often have a lot of limitations. Most don't handle anything beyond the replacement or repair of their product. So, any collateral damage that results from the equipment malfunctioning would be your responsibility. Boiler and machinery insurance would be able to help cover that.

Another consideration is determining what caused the breakdown in the first place. One survey found “nearly half of all equipment-breakdown losses had a significant ‘human element’ impact or influence.” Typically, operator error precludes a warranty being honored. However, with a breakdown and machinery policy, there’s a good chance your claim would be allowed.

Protecting your business’s valuable machinery and equipment starts with a simple online application. An insurance agent can help you find the right boiler and machinery coverage at the best price.

Insureon’s free consultations allow you to compare quotes from the top U.S. insurance companies. Once you find the equipment breakdown coverage that fits your needs, your policy or endorsement can begin almost immediately.