Business Insurance  /  Equipment Breakdown

Commercial Coverage

Equipment Breakdown
Insurance — When It Stops
Working Without Warning.

Your commercial property policy covers fire, storm, and theft. It does not cover a compressor that burns out, a boiler that fails, or a commercial refrigerator that stops working on a Saturday night. Equipment breakdown is the coverage that fills that gap — and for most businesses, it’s the loss they’re least prepared for.

What Equipment Breakdown Insurance Covers

Coverage for mechanical and electrical failure — the losses your property policy specifically excludes.

Equipment breakdown insurance — also called boiler and machinery coverage — covers the cost of repairing or replacing equipment that fails due to mechanical or electrical breakdown. It covers the equipment itself, the income you lose while it’s down, and in many cases the spoilage of inventory or perishable goods that results from the failure. It does not overlap with property insurance — it covers what property specifically excludes.

The distinction matters because mechanical and electrical failure is one of the most common and most costly equipment losses a business faces — and most business owners assume their property policy handles it. It doesn’t. When a commercial HVAC system fails from a mechanical defect, a walk-in cooler’s compressor burns out, or a power surge fries a server, property insurance declines the claim because there was no external cause of damage. Equipment breakdown is specifically designed for those internal failures.

Equipment breakdown coverage is typically added as an endorsement to a commercial property policy or BOP — it’s not a standalone policy in most cases. The additional premium is modest relative to the exposure it covers, which is why it’s one of the most cost-effective coverages a business can add to its program.

“When the walk-in goes down at midnight on a Friday before a busy weekend, you’re not thinking about whether it was caused by fire or mechanical failure. But your insurance company is — and if it’s the latter, your property policy won’t respond without equipment breakdown coverage.”

In Texas, heat and humidity create additional mechanical stress on HVAC systems, refrigeration equipment, and electrical components. Equipment that operates near its capacity limits in the Texas summer is more prone to breakdown — which makes equipment breakdown coverage particularly relevant for any Texas business that depends on climate-controlled operations or refrigeration.

What equipment breakdown covers:

✓
Repair or replacement of failed equipment
The cost to repair or replace covered equipment that fails due to mechanical or electrical breakdown — the core coverage
✓
Business income during downtime
Lost income during the period the business can’t operate normally because covered equipment is down for repair or replacement
✓
Spoilage of perishable goods
Food, pharmaceuticals, or other perishable inventory that is lost when refrigeration or climate control equipment fails
✓
Expediting expenses
Additional costs to speed up repair or replacement — overtime labor, expedited shipping on parts — to minimize the downtime period
✓
Damage to other property
Damage to surrounding property caused by the equipment breakdown — a burst boiler, a leaking refrigerant line, an electrical failure that causes a secondary loss
✓
Service interruption
Some policies extend coverage to losses from utility service interruptions caused by breakdown at the utility provider’s equipment

Why Property Insurance Doesn’t Cover It

Property and equipment breakdown cover fundamentally different causes of loss. Both are necessary — neither substitutes for the other.

This is the most important thing to understand about equipment breakdown coverage. Property insurance and equipment breakdown insurance sit side by side in a complete program — each covering what the other specifically excludes.

Commercial Property Insurance

Covers external causes of physical damage

Property insurance responds when something external damages your equipment — a fire, a storm, a theft, a flood, vandalism. The cause of loss comes from outside the equipment itself. Property policies include a mechanical breakdown exclusion specifically because equipment failure from internal causes is a separate, insurable risk that property wasn’t designed to cover.

A lightning strike damages your commercial HVAC unit. The external cause — lightning — is a covered peril under property insurance. The property policy pays for the repair or replacement of the unit.
Equipment Breakdown Insurance

Covers internal mechanical and electrical failure

Equipment breakdown responds when equipment fails from within — a compressor that burns out from overuse, a motor that seizes, a circuit board that fails from a power surge, a boiler that ruptures from pressure. The cause is internal to the equipment. No fire, no storm, no external event — just the equipment failing as mechanical and electrical equipment sometimes does.

The same HVAC unit’s compressor burns out during peak summer demand — no storm, no external event. The property policy declines. Equipment breakdown pays for the compressor replacement and the business income lost during the repair period.

The practical rule: If something hit your equipment from the outside — property covers it. If your equipment failed from the inside — equipment breakdown covers it. A complete business property program includes both.

What Equipment Is Covered

Virtually any mechanical or electrical equipment your business depends on to operate.

Equipment breakdown coverage is broad — it covers the full range of mechanical and electrical systems in a commercial building or operation, not just a specific list of named items.

HVAC Systems

Heating, ventilation, and air conditioning equipment — compressors, air handlers, chillers, cooling towers. For Texas businesses, HVAC failure during summer is both common and immediately disruptive to operations.

Refrigeration Equipment

Walk-in coolers and freezers, reach-in refrigerators, commercial ice machines, display cases. For restaurants, grocery stores, and any business with perishable inventory, refrigeration failure is both a property loss and a spoilage loss.

Boilers & Pressure Vessels

The original “boiler and machinery” coverage — boilers, water heaters, steam systems, and pressure vessels used in commercial operations. Boiler failure can cause significant damage beyond the equipment itself.

Electrical Systems & Panels

Electrical panels, transformers, switchgear, and wiring systems. Power surges, electrical faults, and arc flash events can cause significant damage to electrical infrastructure — covered under equipment breakdown, not property.

Computers & Electronic Equipment

Servers, computers, POS systems, and electronic equipment that fails from power surges, electrical faults, or internal component failure. Equipment breakdown covers the repair or replacement of the hardware itself.

Production & Manufacturing Equipment

Machines, presses, pumps, conveyors, and other production equipment that fails mechanically. For manufacturers, a single machine failure can shut down production — equipment breakdown addresses the repair cost and the income lost during downtime.

Who Needs Equipment Breakdown Coverage

Any business where a mechanical or electrical failure would create a significant financial loss.

If your business depends on mechanical or electrical equipment to operate — and a failure would cost you money in repairs, lost income, or spoiled inventory — equipment breakdown coverage belongs in your program.

Restaurants & Food Service

Commercial refrigeration, walk-in coolers, cooking equipment, and HVAC are all high-failure-risk, high-cost items. A compressor failure on a Friday evening can mean lost revenue and spoiled inventory simultaneously.

Grocery & Convenience Stores

Refrigerated display cases, walk-in coolers, and freezer systems represent significant equipment value and carry substantial spoilage exposure if they fail — especially for stores with high-value perishable inventory.

Manufacturers

Production equipment failure can shut down an entire operation. Equipment breakdown covers the repair cost and the business income lost during the downtime period — both of which can be substantial.

Office Buildings & Property Owners

HVAC systems, elevators, electrical systems, and boilers in commercial buildings are all covered under equipment breakdown. Building owners carry this exposure for every system in the building.

Retailers

POS systems, HVAC, and any specialized equipment — jewelry cleaning machines, dry cleaning equipment, printing presses — create business interruption risk when that equipment fails.

Healthcare & Dental

Medical and dental equipment, sterilization systems, and laboratory equipment represent significant replacement cost exposure. Equipment failure in a healthcare setting also creates scheduling disruption beyond the equipment itself.

Hotels & Hospitality

HVAC, elevators, laundry equipment, kitchen systems, and pool equipment all represent equipment breakdown exposure in a hospitality operation where guest experience depends on every system working.

Any Business with Critical Equipment

If there’s a piece of equipment in your operation whose failure would immediately disrupt your business or cost significant money to repair — equipment breakdown coverage is designed exactly for that exposure.

Real Scenarios.

Equipment failures that happen to real businesses — and why property insurance wouldn’t cover any of them.

01
A restaurant’s walk-in compressor fails on a Friday night
A restaurant’s walk-in cooler compressor burns out during dinner service. Several thousand dollars of food begins to spoil. The restaurant is forced to close for the weekend while a replacement compressor is sourced and installed. Equipment breakdown covers three things: the compressor replacement, the spoiled food inventory, and the lost income for the days the restaurant couldn’t operate. The property policy covers none of it — no external cause, no covered peril.

03
A power surge destroys an office server
A brief power surge from a utility fluctuation fries a small business’s server — taking down the company’s network, data access, and POS system. The physical damage to the server is from an electrical event internal to the power supply — not a lightning strike from outside, which would be property. Equipment breakdown covers the server replacement and the business interruption while systems are restored.

05
A dental office’s autoclave fails
A dental practice’s autoclave — used to sterilize instruments — fails mechanically. Without a functioning autoclave, the office can’t safely treat patients and must cancel appointments for several days while a replacement is sourced. Equipment breakdown covers the autoclave replacement and the business income lost from the appointment cancellations.

02
A commercial HVAC system fails during Texas summer
A retail store’s HVAC system fails in July — the compressor overheats and seizes after running at capacity through a Texas heat wave. The store can’t remain open at 95 degrees inside. Repair takes three days, including expedited shipping on a replacement compressor. Equipment breakdown covers the repair cost and the business income lost during the three-day closure. Property declines — no external cause of loss.

04
A manufacturing machine breaks down mid-production run
A hydraulic press at a small manufacturing operation develops a mechanical failure mid-run. The repair requires a specialty technician and parts with a 10-day lead time. Production is shut down for nearly two weeks. Equipment breakdown covers the repair cost — including the expediting premium for faster parts delivery — and the lost production income during the downtime.

06
A hotel elevator goes out of service
A hotel’s elevator fails mechanically, making upper floors inaccessible for guests with mobility limitations. Several room reservations are cancelled. Equipment breakdown covers the elevator repair, the expediting expenses to speed the repair, and the business income from the cancelled reservations.

Why Get Equipment Breakdown Coverage Through McKnight

It’s one of the most overlooked and most cost-effective coverages in a business program.

Equipment breakdown coverage is consistently one of the most underutilized coverages available to small businesses — not because the exposure isn’t real, but because most business owners don’t know to ask for it and most agents don’t bring it up. When we review a business’s property program, we specifically check whether equipment breakdown is in place and whether the spoilage and business income components are adequate for the operation.

The premium for equipment breakdown coverage is modest — typically a few hundred dollars per year added to an existing property policy or BOP as an endorsement. For a restaurant with $30,000 in perishable inventory and $5,000 per day in revenue, that’s a straightforward value calculation. For any business where a single equipment failure could cost more than the annual premium, the coverage makes sense.

We also make sure the coverage limits are set correctly — particularly the spoilage sublimit for businesses with significant perishable inventory, and the business income limit for businesses where downtime is expensive. Default endorsement limits are sometimes too low to reflect the actual exposure. We review both before placing or renewing any property program.

Included in property program review
We check for equipment breakdown every time we review a business property program — it’s a gap we look for specifically.

Spoilage and income limits reviewed
Default sublimits are sometimes inadequate. We make sure the limits match your actual perishable inventory and daily revenue.

100+ carriers
Equipment breakdown terms vary by carrier. We find the endorsement or policy that provides the right coverage for your operation.

Real answers when you call
817.277.6166, weekdays 8:30–5pm. Equipment that just failed, coverage questions, or a claim in progress — we pick up.

FAQ

Equipment breakdown questions we hear all the time.

What is equipment breakdown insurance and what does it cover?
Equipment breakdown insurance covers the cost of repairing or replacing equipment that fails due to mechanical or electrical breakdown — internal failure with no external cause. It also covers the business income lost while the equipment is down, spoilage of perishable goods that results from refrigeration or climate control failure, and expediting expenses to speed up repair. It is typically added as an endorsement to a commercial property policy or BOP and covers what property insurance specifically excludes.
Doesn’t my property insurance cover equipment that breaks down?
No — commercial property policies include a mechanical breakdown exclusion that specifically excludes equipment that fails from internal mechanical or electrical causes. Property insurance covers equipment damaged by external events — fire, storm, lightning, theft. Equipment breakdown covers what happens when equipment fails from within — a compressor that burns out, a motor that seizes, a circuit board that fails from a power surge. The two coverages work together as a pair; neither substitutes for the other.
What’s the difference between equipment breakdown and a service warranty?
A manufacturer’s warranty or extended service contract covers the repair or replacement of specific equipment by the manufacturer or servicer — typically for defects and failures within a defined period. Equipment breakdown insurance is broader: it covers all covered equipment across your business simultaneously, includes business income lost during downtime, covers spoilage, and doesn’t expire when a warranty does. For most businesses, equipment breakdown coverage provides more comprehensive and longer-lasting protection than relying on individual equipment warranties.
Does equipment breakdown cover spoiled food if my refrigeration fails?
Yes — spoilage coverage is one of the most valuable components of equipment breakdown for restaurants, grocery stores, and any business with perishable inventory. When refrigeration or climate control equipment fails and perishable goods are lost as a result, the spoilage component covers the value of the lost inventory. The spoilage sublimit needs to reflect your actual maximum perishable inventory value — default limits in some endorsements are set lower than what a well-stocked restaurant or grocery operation actually carries. We review this specifically when placing the coverage.
Does equipment breakdown cover damage caused by a power surge?
It depends on the source of the surge. A power surge caused by a lightning strike is typically a property claim — lightning is an external covered peril. A power surge from a utility fluctuation or an internal electrical fault — with no external lightning event — is typically an equipment breakdown claim. The distinction between the two is sometimes unclear, which is why having both property and equipment breakdown coverage in place ensures the loss is addressed regardless of which policy ultimately responds.
How much does equipment breakdown coverage cost?
Equipment breakdown coverage is typically added as an endorsement to an existing property policy or BOP at a modest additional premium — often a few hundred dollars per year for most small businesses. The cost is low relative to the exposure it covers: a single compressor replacement can cost $5,000–$15,000, a server replacement $3,000–$10,000, and commercial refrigeration repairs can run even higher. For any business where a single equipment failure would cost more than the annual premium, the coverage is straightforward to justify.
Is equipment breakdown coverage the same as boiler and machinery insurance?
Yes — equipment breakdown insurance is the modern name for what was historically called boiler and machinery (BM) insurance. The original coverage focused on steam boilers and mechanical machinery when those were the primary equipment risks in commercial buildings. Today the coverage is broader, covering HVAC, refrigeration, electrical systems, computers, and virtually any mechanical or electrical equipment — the name evolved to reflect the scope. If you see either term, they refer to the same category of coverage.

Get Started

Let’s make sure your program covers both what damages your equipment and what happens when it simply fails.

Call us or request a quote. We’ll review your equipment exposure, check your current property program for this gap, and add the right coverage at the right limits.

McKnight Insurance Services  ·  Mansfield, TX  ·  Weekdays 8:30am–5pm