When equipment is working, we take it for granted. But when something breaks down − whether it’s a computer, electrical systems, a production machine, or the HVAC − things can quickly grind to a stop. However, what many people do not realize is that most of the equipment they depend upon every day isn’t covered by their property insurance if it suddenly breaks down.
That’s why equipment breakdown insurance, also known as “boiler and machinery” insurance, is so important to restaurant owners. It covers your losses and helps get you up and running quickly if your equipment breaks down.
The basics of equipment breakdown insurance covers five categories of equipment:
Electrical:Equipment like transformers, electrical panels and cables can arc, or short-circuit, and cause the power to fail, sometimes leading to a fire or explosion.
Mechanical: Includes specialized production and manufacturing equipment, motors, engines, generators, elevators, and water pumps. These often wear out or break down due to metal fatigue, vibration, misalignment or operator error.
Computers and Communications Equipment: Computers, phone systems, voice mail systems, security and fire alarm systems can be damaged by power surges or electrical fluctuations, which can cause partial business interruptions or even worse, could literally shut you down for days.
Air Conditioning and Refrigeration Systems: Notorious for failing at the worst possible time, this type of equipment is usually costly to repair, and can cause real havoc to business operations and income. Customers can be driven away by a hot environment, and products may be spoiled by broken refrigeration, resulting in a significant loss.
Boilers and Pressure Equipment: Equipment like boilers and pressure vessels provides steam for heat, hot water, cooking or sterilization. Depending on your business, a lack of heat or hot water can close the doors, or worse, a malfunction in this equipment could result in more serious damage.
How am I covered?
Equipment breakdown insurance pays for repairs or replacement of damaged equipment resulting from an insured accident. You don’t need to own the building in which your business is housed in order to be covered. You are also covered if some of the equipment used by your business is leased or rented, and you have a contractual obligation to insure it. Depending on the policy, your coverage could extend to portable equipment that is damaged when temporarily away from your business location as well as property owned by others in your care, custody or control.
Additionally, equipment breakdown insurance covers the costs associated with the time and labor to repair or replace the equipment as well as business income losses caused by a breakdown. It also covers other expenses incurred to limit the loss or speed the restoration, for example, to replace spoiled or contaminated food or other materials damaged as a result of the equipment breakdown.
Restaurants owners in the Bay Area are susceptible to these types of risks and should make sure mechanical breakdown coverage is in your current policy. If not, you have reason to be concerned, because you don’t have proper coverage and may have to pay out of pocket for any or all necessary repairs.
If you have any questions, please feel free to email me.