Boiler and machinery insurance provides coverage for small-business owners who lease or own property for both physical damage and financial losses resulting from key equipment breakdowns. This coverage can be structured as a standalone policy or imbedded in existing business policies. Standalone policies are highly specialized with unique premiums suited to individual business risks.
Boiler and Machinery Insurance Providers
Most insurance carriers offer boiler and machine endorsements to existing business policies while large national providers or specialty underwriters offer standalone policies. If you have an existing business policy, your carrier will be able to tell you if it can add coverage to it or if you need a separate specialty policy.
Top Boiler and Machinery Insurance Providers
|Hartford Steam Boiler Company||Companies with highly specialized machinery requiring individual risk assessment.|
|Chubb||Large education and hospitality organizations such as schools, universities, hotels, and motels.|
|Travelers Group||Service providers in the medical industry including hospitals, clinics, and diagnostic centers.|
|The Hartford||Small businesses owners who want to add equipment breakdown coverage to an existing policy.|
|CoverWallet||Hard-to-insure businesses that need a broker to help find equipment breakdown coverage.|
Because boiler and machinery insurance is highly specialized and has the potential for high claim payouts, not all insurance carriers want to take on the risk. It is important to consider the potential value of a claim not just to the machine but potential lost revenue of the company.
Some providers to consider for boiler and machinery insurance include:
Hartford Steam and Boiler (HSB) is owned by AIG but has a history of more than 150 years of insurance innovation. This carrier is considered the industry standard when it comes to boiler and machinery insurance, but isn’t limited to this one specialized coverage. HSB also offers a range of specialty lines and reinsurance programs for other carriers that want help insuring these unique risks.
HSB is a perfect choice for any company heavily reliant on industrialized machinery such as manufacturing plants. HSB offers monoline policies underwritten with the specific machinery risks and potential business loss in mind and is still considered the premier underwriter for all equipment breakdown coverage needs.
Chubb is the largest publicly-traded property and casualty insurance company in the world and a top commercial insurance carrier in the United States. Chubb’s vast underwriting experience gives it an ability in underwriting risks other carriers won’t. Chubb offers an entire range of insurance policies including general liability, business property, and workers’ compensation insurance.
Chubb is considered a leader when it comes to working with large organizations in the education and hospitality industries because it understands the financial loss that can result from a single day of lost service. It even has the financial capacity to insure small schools or universities.
Travelers Group is one of the largest commercial insurance companies in the world and is the second largest in the United States. This insurance carrier looks at big and unique risk but also works to provide competitively priced policies for small-business owners. Travelers Group is able to underwrite specialized boiler and machinery insurance policies as well as endorsements on existing policies.
Travelers Group excels at handling all specialized risk in the medical and health care industries making it a great carrier for hospitals, imaging centers, and senior care facilities. This carrier looks at underlying equipment risk and either embeds the equipment breakdown coverage within a larger commercial policy or writes a standalone policy to best protect the business
4. The Hartford
The Hartford is a national leader for small business insurance covering an entire range of business risks from general liability for a sole proprietor to specialized policies for global companies including boiler and machinery insurance. The Hartford’s goal is to make business insurance as comprehensive as possible with primary coverage that’s much broader than its competitors.
The Hartford is a good option for small-business owners who have equipment breakdown exposure but don’t necessarily need a standalone policy. By incorporating coverage in The Hartford’s standard business policies, business owners often save money and get the proper risk coverage required.
CoverWallet is a commercial insurance broker that helps small-business owners get the right coverage through top-rated insurance companies. Its online platform helps customers understand the coverage required to then quickly navigate through a quote to get a policy within minutes. In addition to boiler and machinery insurance, CoverWallet also offers general liability, business property, and workers’ compensation insurance.
CoverWallet is a good broker to help a small-business owners who want to shop around for coverage. With a few simple clicks, CoverWallet is able to send queries out to a variety of top carriers and determine if you need a standalone policy or an endorsement to another business insurance policy.
What Boiler and Machinery Insurance Is
Boiler and machinery insurance policies, also referred to as equipment breakdown insurance, cover a wide range of potential losses resulting from machine or equipment failure. They also cover the very specific financial risks associated with accidental damage to covered equipment. Accidents may result from mechanical breakdown, including rupture, electrical overload, explosion, or operator error.
The insurance policy defines covered equipment for boiler and machinery needs as items that transmit or utilize energy or operate under vacuum modes or pressure. Boiler and machinery insurance is typically used to cover computers, diagnostic equipment, heating and air units, and key machinery used in daily operations.
What Boiler and Machinery Insurance Covers
Boiler and machinery insurance pays losses that result when equipment breaks down due to fire, flood, explosion, operator error, or other sudden malfunctions not due to normal wear and tear. Losses include the repair or replacement of the machine as well as loss of income to the business that can’t operate without the equipment, as well as some ancillary costs.
Boiler and machinery insurance covers a wide range of damage and loss including:
- Physical Damage: Covers the cost to repair or replace damaged or destroyed equipment
- Business Income: Pays loss of income and revenues resulting from breakdown that causes partial or total business interruption
- Service Interruption: Extends loss of income to business interruption when equipment breakdown leads to utility interruption
- Perishable Goods: Pays to replace products or materials lost after equipment breakdown. Also called spoilage
- Extra Expense: Covers extra costs to re-establish normal business operations including rented equipment
- Expediting Expense: Pays extra fees required by repair facilities or rush order delivery fees to get new equipment to a business faster
What Boiler and Machinery Insurance Doesn’t Cover
Boiler and machinery insurance has many exclusions including:
- Wear and Tear: Normal failures due to the age and reasonable use of equipment are not typically covered
- Normal Maintenance: Regular maintenance is the obligation of the business owner to mitigate equipment failure
- Leakage: Equipment leakage refers to unintentional electrical connection where overcurrent trips circuits and potentially overloads equipment
- Mobile Equipment: Tractors, bulldozers, or forklifts owned by the business typically aren’t covered
- Vehicles and Aircraft: Commercial vehicles and aircraft used for business purposes
- Floating Vessels: Boats, barges, and all other water-faring craft are excluded, even if they’re used for business
- Domestic Water and Sewer Piping: Plumbing systems within the building that lead to public sewers are not covered by boiler and machinery insurance
A business that doesn’t depend on equipment doesn’t need boiler and machinery insurance. Be sure to review your risks with your insurance agent to be certain you are covered for the biggest potential risks.
Who Boiler and Machinery Insurance Is Right For
Standalone or “monoline” boiler and machinery insurance policies go through individual underwriting to access the exact equipment risk that could lead to hundreds of thousands, if not millions in repairs and lost revenues. Equipment breakdown coverage imbedded in other business owners policies uses less stringent underwriting because the entire business is reviewed.
Consider boiler and machinery insurance if your business relies on things like:
- Computer equipment
- Hot water heater
- Air conditioning and heating
- Refrigerators and freezers
- Diagnostic equipment
- Power hydraulic lifts
- Manufacturing equipment
Most small-business owners don’t need a standalone boiler and machinery insurance policy. However, if your production requires the use of very specific machines that are valuable, expensive to repair, or will halt business production if broken, you should consider a policy. Generally speaking, manufacturers and companies with large processing centers require boilers and machinery insurance.
Boiler & Machinery Insurance Example
One example of a business that needs a standalone boiler and machinery policy is a high-end electronics manufacturer. Most companies like this have assembly lines with components that keep production moving. If a flywheel overheats and disintegrates, the entire assembly line is shut down. The flywheel may not only cost $25,000 to replace, but the lack of production could mean 4,000 units a day are not produced.
If it takes a week to obtain the replacement flywheel via rush order, the resulting loss is 28,000 units not produced. If each unit has a wholesale cost of $250, the resulting loss of revenue to the business totals $7 million, which far exceeds the cost of repair and replacement.
Commercial Property Owners and Investors
For a commercial property owner, boiler and machinery insurance protects their physical investment as well as the potential loss of income or rents from building tenants. As a business owner, a landlord’s product is the building and property assets. If a building is uninhabitable, potential losses include the repair and replacement of equipment and any lost rent.
Many landlords transfer maintenance responsibility to their tenants via lease terms. This may include single-unit systems like HVAC, water heaters, or other unit assets. However, if there is common equipment such as a central air conditioning unit that fails, tenants may refuse to pay rent while the building is unusable.
Boiler and Machinery Insurance Costs
Because boiler and machinery insurance standalone policies are so highly specific to a risk, cost vary widely. Underwriters don’t just look at the value of the equipment but repair costs, access to replacement parts and repairmen, and the potential for lost revenue. Every business is different. If you feel you need a standalone policy, have a carrier assess your risk to give you the best options.
Boiler and Machinery Insurance vs Equipment Breakdown
Boiler and machinery insurance is frequently called equipment breakdown coverage when included as part of a larger policy. However, this insurance was historically called boiler and machinery when this type of technology was used to heat buildings. While most insurance companies call the policy equipment breakdown, it is still referred to as boiler and machinery (B&M) by many agents and insurance carriers.
Warranties and Boiler and Machinery Insurance
Warranties and maintenance contracts cover the costs associated with routine care and maintenance of the machinery or equipment. Unlike boiler and machinery insurance, warranties do not cover damage resulting from operator error. Warranties do help to cover the costs associated with regular maintenance issues that boiler and machinery doesn’t.
Even if the equipment is still under warranty, having boiler and machinery insurance pays for uncovered claims plus the resulting loss of income. Warranties don’t ever pay for the lost business revenues associated with equipment breakdown.
Tips on Getting Boiler and Machinery Insurance
Consider these three tips when asking your insurance agent for boiler and machine insurance:
1. Check Lease Terms for Equipment and Usage
If you are leasing space, read your lease terms diligently. It is important that you understand whether your landlord has transferred the maintenance of the HVAC unit or any other equipment to you. Find out what the landlord’s obligations are to cure problems and if you have legal remedies to collect lost wages. A claim on the landlord is better than a claim on your insurance.
2. Know Your Revenue Numbers
Properly assessing risk of income loss requires having accurate revenue data. Any business interruption coverage policy pays based on proven revenues. Overstating revenue simply means you pay more in premium that will never pay the extra in return. Review these numbers with your insurance agent and report any changes to revenue annually.
3. Inventory Equipment Your Business Relies On
Boiler and machinery insurance rarely requires you to inventory the equipment you use. However, the more expensive equipment you have, the higher your property value coverage needs to be. This means if you choose property coverage ― the portion that covers the repairs or replacement ― of $20,000 but you have a $40,000 piece of equipment, you are underinsured.
Boiler & Machinery Insurance Frequently Asked Questions (FAQs)
Boiler and equipment insurance isn’t the most common insurance policy so there are a lot of questions about how it works.
What is boiler and machinery insurance?
Boiler and machinery insurance is frequently called equipment breakdown coverage. It pays for repairs and replacement of damaged business machinery and any financial losses that result from not being able to maintain normal business operations. Both property owners and tenants can tailor coverage to meet their unique business equipment risks.
Is equipment breakdown the same as boiler and machinery?
Equipment breakdown insurance is a modern form of boiler and machinery insurance. The Hartford Steam Boiler Co was founded in 1866 when business machinery was limited. Over the years, insurers have expanded coverage to many different types of business equipment beyond original boiler and machinery life expectancy.
What does mechanical breakdown mean?
Mechanical breakdown in commercial insurance is when necessary equipment such as heating, air conditioning, computers, refrigeration, or manufacturing machines fail. Failure includes damage from a number of known perils including fire, water damage, or vandalism, but may also result from sudden machine breakdown for unknown reasons that lead to business financial loss.
Boiler and machinery insurance is a specialized coverage that often comes with a lot of confusion because it can be added to other policies. Most small-business owners of standard risk classifications don’t need a standalone policy. Those that do should work with carriers that specialize in the business or industry to properly classify and price the risk.