Whether you’re a professional service provider, a retail shop owner, a contractor or a skilled tradesperson, it’s likely that your small business relies on some sort of equipment for your daily operations. Maybe it’s an electrical oven used to create delicious baked goods, or it could be an electric saw you transport between job sites. Whatever equipment your business needs, it’s important to ensure it’s protected under your small business insurance policy.
Most commercial property insurance policies for small business are designed to protect both the building you operate out of and the contents inside. Commercial property insurance can protect a long list of possessions from specific losses including equipment, inventory, furniture, computers and other electronics. It can also provide protection for things outside of the building, which can include outdoor signs, fencing and landscaping. Unfortunately, your commercial property policy may not cover you for another problem: the sudden, accidental breakdown of your company’s vital equipment.
What is equipment breakdown insurance?
Your property insurance policy can typically help protect your equipment from damage caused by external sources such as fire, some forms of water damage and losses related to weather. It may not cover internal sources.
When referring to equipment, internal sources of damage may include:
- Explosion damage from boilers and piping containing steam or water under steam pressure.
- Explosion damage from other pressure vessels and apparatus with operating pressures over 15 pounds per square inch.
- Mechanical or electrical breakdown, derangement or centrifugal force.
Equipment breakdown insurance is an additional coverage option that helps mitigate losses due to these types of issues within your company’s equipment. What would happen if the heating or air conditioning system in your commercial space broke down suddenly? What if you’re a baker and your electrical oven broke down without warning? Without proper insurance coverage for these situations, you could face costly repair or replacement costs and you may not be able to continue your operations right away, which could disrupt your customer or client experience and damage your reputation. The right equipment breakdown policy can help keep your costs low in these types of situations and get you back to business fast.
What types of business should have equipment breakdown insurance?
In the past, equipment breakdown insurance was only seen as necessary for large manufacturers, and not crucial for small business owners. With today’s business world becoming increasingly reliant on electrical equipment, this is no longer the case. Nearly every small business owner relies on some piece of technical, digital, or electrical equipment for their day-to-day operations, putting them at risk for sudden or accidental equipment breakdown. Newer technology also tends to be more fragile than traditional business equipment, which has made it more susceptible to mechanical or electrical breakdowns.
- Bakeries and restaurants that rely on electrical kitchen equipment
- Contractors and other skilled tradespeople who require equipment/tools on jobsites
- Property owners with security systems in place, air conditioning or generators
Typically when purchasing expensive equipment, you’re offered some sort of warranty. Whether it’s included or purchased for an additional cost, warranties can be extremely helpful for a small business owner; however, it’s important to read what is and isn’t covered in your equipment warranty very carefully. Some small business owners don’t think they need equipment breakdown insurance because their equipment is still under warranty, but that isn’t always the case. One of the main things that often isn’t covered in a warranty is operator error, which means if the damage to the equipment is found to be caused by the individual operating it, your warranty won’t cover the repair or replacement costs. Some equipment breakdown policies may cover situations such as these.
Other coverage options to consider:
Commercial general liability insurance: Commercial general liability (CGL) insurance is designed to protect you and your business from a loss if you’re found legally liable for bodily injuries or property damage to a third party caused by the product you sell or the service you provide. CGL insurance can also offer protection in situations where you or your employees are conducting business offsite.
Product liability insurance: Product liability insurance is often included in a CGL policy, but not always. It’s important to double check that your small business insurance policy does protect you from risks associated with product liability claims.
Cyber risk and data breach coverage: Cyber attacks are an ongoing threat to small businesses and have continued to rise recently. Cyber event expense coverage is designed to help small businesses that rely on technology mitigate some of the expenses that may incur as a result of a cyber hack.
Professional Liability: If one of your clients or customers claims your advice caused them a financial loss, your professional liability coverage can help you recover from the financial consequences that may incur. This coverage is also known as errors and omissions (E&O) coverage.
Property insurance: As a small business owner, you likely rely on your property, tools, equipment and technology to help keep your business running. If one of those key pieces of the puzzle was damaged and needed repair, you may not be able to continue operations. This is when you need property insurance coverage.
Commercial auto insurance: If you or your employees use your vehicle for business purposes you need commercial auto insurance to protect that vehicle in ways your personal auto policy may not be able to.