I believe this insurance coverage is the most misunderstood insurance coverage available. Most insured’s that have this coverage do not truly understand what the coverage actually covers. Most insurance policies include mechanical breakdown (equipment breakdown) coverage. If it is not included, it usually can be added to your policy. The mechanical breakdown limits are equal to the total property limits. For example, if you have $200,000 business personal property, the mechanical breakdown limit would be $200,000. If you had a building insured for $500,000 and business personal property at $200,000, the mechanical breakdown limit would be $700,000. The coverage is typically written on a replacement cost basis.
This coverage is not – and I have to repeat, not – a maintenance policy. There is no coverage for wear and tear or rust and corrosion. These items are excluded along with earthquake and flood, as well as some others. In my experience, most mechanical breakdown claims are a result of rust and corrosion.
Rust and corrosion and/or wear and tear are maintenance issues. There is no policy that I am aware of that covers these occurrences. I realize boiler repairs can be very costly and certainly if there is a doubt, don’t hesitate to report a claim to your insurance carrier.
An important feature of this mechanical breakdown coverage is boiler inspections. If your state or local government requires your boiler to be inspected, the company will inspect your boiler with no charge. You will avoid the inspection fees charged by the local jurisdictions. It is important to notify your insurance company that your inspection is due. You will, however, be responsible for paying the certificate fee. Some insurance companies may charge extra for the inspection so check with your insurance agent.
If your loss is covered, mechanical breakdown coverage also covers loss of business income. In addition, it would cover other expenses incurred to limit the loss or speed restoration. For example, having another cleaner process your work while your boiler is down. Any expenses you would have while doing this would be covered, but only if the cause of your loss is covered.
I covered this in an article quite some time ago. Let this serve as a refresher course. I don’t want you to be upset when you are faced with the restrictions of this coverage. It is very important, as part of your business insurance policy. The additional cost is minimal and many policies include it at no additional charge. This is why you should deal with an insurance professional who is familiar with your business and your needs.