Understanding equipment insurance vs. equipment breakdown insurance

Equipment breakdown insurance

No matter what kind of start-up or small business you own, it’s very likely that you require some sort of equipment for your daily operations. If you’re a baker, you need your oven; if you’re a home builder, you need your electric saw; if you’re a videographer, you need your camera and sound equipment—every industry requires proper tools and equipment to keep things running smoothly. It’s important to ensure you have the proper insurance coverage to keep this equipment safe in the event of a loss. While your commercial property insurance will cover your business equipment, certain instances of damage may require additional coverage. Understanding the differences between equipment insurance and equipment breakdown insurance can help you protect your small business from costly repair or replacement costs when you experience damage to your equipment.

What is the difference between equipment insurance and equipment breakdown insurance?

Equipment insurance:

Commercial property insurance for small businesses is designed to protect both the building you operate your business out of and the contents inside, including your equipment. This type of insurance coverage can protect small business owners from a loss related to a long list of things including inventory, furniture, tools, computers and other electronics. It can also provide protection for things outside of the building including outdoor signs, fencing and landscaping.

Coverage for your equipment will be included in your commercial property insurance policy—but it’s important to understand exactly what types of damage are and aren’t covered by your policy. Property insurance will typically protect you from repair and replacement costs to your equipment caused by external sources. For example, if a fire breaks out in your shop resulting in damages to your equipment, you could look to your property insurance policy for coverage.

Some other examples of external sources of damage typically covered are:

  • Flood damage
  • Severe weather damage
  • Theft
  • Vandalism

Unfortunately, your commercial property policy may not cover another common problem: the sudden, accidental breakdown of your company’s equipment cause by internal sources. This is when you’d turn to your equipment breakdown insurance for coverage.


Equipment insurance protects from damage resulting from external causes, equipment breakdown insurance helps with damage caused by internal issues.


Equipment breakdown insurance

Equipment breakdown insurance is a form of additional coverage that goes over and above your commercial property policy. If your equipment requires repairs or replacement due to internal issues, your equipment breakdown coverage can help mitigate some of those costs. Some forms of damage typically covered by equipment breakdown insurance include:

  • Explosion damage from boilers and piping containing steam or water under steam pressure
  • Explosion damage from other pressure vessels
  • Mechanical or electrical breakdown, derangement or centrifugal force

Mechanical and electrical breakdowns are common for small business owners. For example, let’s say you’re a retail shop owner and it’s holiday shopping season. What would you do if an unforeseen power surge caused damage to the electrical heating system in your store causing it to stop working? Your property policy may not cover this, and without equipment breakdown coverage you could face costly repairs.

Do you need equipment breakdown insurance?

For a long time, equipment breakdown insurance was mainly important to large manufacturers, and not so important for small businesses. With the digital shift in today’s business world, this is no longer the case. Small business owners rely on technology more than ever, making equipment breakdown insurance a key coverage type for them to consider. If you’re a retailer that relies on an electronic register to process and store customer invoices and other important information, what would you do if it broke down suddenly and without warning? It would be very difficult to continue operations in a situation like this which could disrupt your customer experience. Newer technology can be more fragile than traditional business equipment and can be more susceptible to sudden breakdowns. Business types that should consider additional equipment breakdown coverage include:

  • Bakeries and restaurants that rely on electrical kitchen equipment
  • Contractors and other skilled tradespeople who require equipment on jobsites
  • Professional or creative service providers who rely on computers, networks or other electrical systems for their day-to-day operations

Do not rely solely on equipment warranties

Often, expensive equipment has a warranty when it’s originally purchased. Some small business owners think they don’t need equipment breakdown insurance because their equipment is still under warranty, but that’s not always the case. Some warranties won’t cover specific damages including operator error. For example, if you work out of your home and accidentally plug too many devices into the wall, overloading the circuit and damaging one of your devices, the manufacturer of the device may label this an operator error and may not cover the damages.

This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information. Terms, conditions and exclusions apply to coverage – see policy for details.