During the height of the manufacturing era, it wasn’t unusual for a business owner to experience massive losses due to boiler and machinery breakdowns.
To protect against the risk of business failure, lost contracts and the resulting costs associated with machinery breakdowns, commercial policies provided basic protection in the form of boiler and machinery insurance.
As machinery has become much more sophisticated, so has the coverage offered to business owners. Equipment breakdown coverage is now one of the most important forms of insurance offered by many underwriters.
If you think your business wouldn’t benefit from equipment breakdown insurance, you’d better think again. Experts say the electric system alone represents an average of 8% to 15% of the cost of a facility, and a single electrical arc can damage as much as 50% of a building’s infrastructure. This doesn’t include electronic equipment, transformers, office equipment and machinery that could be impacted.
The cost to a company can be staggering, especially when the total loss is added up. Repair costs, continuing operating expenses and loss of profits can easily add another 50% to total losses. Even business owners who rent or lease a building are not immune to the risk of equipment breakdown, as the cost of repairs, business disruption and loss of data may still fall on the shoulders of the commercial tenant.
Likewise, even brand-new equipment can be at risk due to storms, power outages or system malfunctions, making equipment breakdown insurance just as popular among new start-ups as among older entities.
Fortunately, underwriters recognize the needs of different organizations and have responded with a growing variety of choices for small-business owners. Rather than a one-size-fits-all approach, underwriters may offer a stand-alone policy or a policy that’s part of a larger package.
Exposure and risk assessments are becoming more responsive to the needs of each policyholder as the market for new technology matures, making self-insurance much less desirable than in the past.
Today’s equipment insurance rates are much more affordable than those of even 15 years ago, thanks in large part to better understanding of risk and protective factors.
Equipment insurance is quickly becoming an expectation in order to apply for funding or to raise capital, since investors and banks want assurances against unexpected losses or unanticipated disruptions of business.
In fact, the importance of equipment insurance is growing as partnership and solution providers also seek more stable relationships.
One way to reduce the inherent relationship risk involved in doing business with other providers is to make sure that they are not subject to business disruptions or interruptions.
Small-business owners hoping to secure funding or finance partnership opportunities may find equipment breakdown insurance an especially valuable investment.
Fortunately, it’s an affordable type of insurance, representing a small portion of the total insurance costs of even the most equipment-intensive enterprises.