IMAGINE IT’S a typical hot July day. You own a 30,000-square-foot office building that is 85% occupied. And the air conditioning and ventilation systems stop working. The outside temperature is in the 100’s. It doesn’t take long before the tenants start to complain.
The contractor you summon determines that an electrical arc fried the circuit board that controls the systems. The board must be replaced, but it will take up to five business days for it to arrive. In the meantime, the building is unfit for people to work in, and the leases oblige you to credit tenants’ rents for periods when the building in uninhabitable for more than a day. In short, you face thousands of dollars in repairs and much more in lost rents.
Worse, your property insurance does not cover the equipment or lost rent. What you need is equipment breakdown insurance. Property insurance policies will cover the resulting property damage from fires, explosions or other damage caused by these events. But it won’t cover the equipment or lost income from the downtime during repairs like equipment breakdown insurance will. Equipment breakdown insurance is not a substitute for other property coverage. It will not pay for damage caused by fire, lightning, explosions from sources other than pressure vessels, floods, earthquakes, vandalism, and other causes of loss covered elsewhere. Equipment breakdown policies are designed to fill in the gaps left by other policies, not to replace them. Also, they do not cover mechanical breakdowns that result from normal wear and tear as a device ages.
WHAT IT COVERS
- Cost of repairing or replacing the equipment.
- Lost business income from a covered event.
- Extra expenses you incur due to a covered event.
- Limited coverage for losses like food spoilage in freezers that break down.
There are five categories of equipment that this insurance typically covers:
TYPES OF EQUIPMENT
- Mechanical. This includes motors, engines, generators, elevators, water pumps and specialized production and manufacturing equipment.
- Electrical. This includes transformers, electrical panels and cables.
- Computers and communications. This includes computer systems, phone systems, voice mail systems, security systems and fire alarm systems.
- Air conditioners and refrigeration systems.
- Boilers and pressure equipment.
Why you need it
Many businesses rely heavily on machines in their daily operations, from computers and printers to refrigeration equipment, elevators and manufacturing equipment. For some, the cost of repairs to this equipment and resulting downtime can have a serious impact on company finances. Such businesses should seriously consider buying equipment breakdown insurance. Call us if you would like to discuss this crucial form of coverage.
Changes to Monthly Premium Payments
More and more insurers are clamping down on policyholders who pay their premium payments late. It’s been fairly standard practice for insurers to allow some leeway if a policyholder is one or two days late on their premium payments, by letting the policy reinstate after it cancels due to late payment. Carrier also would send out several warning e-mails to let the policyholder know they need to pay their premium immediately.
Be warned: Many insurers will no longer reinstate or offer new coverage if the policy cancels due to late payment. Also, carriers have stopped sending warning letters to policyholders that their payment is nearly due.