HSB BI&I - Why do I need equipment breakdown coverage?

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Why do I need equipment breakdown coverage?

Find out how to protect your business

Think about the impact on your business if your equipment fails.
Immediately, your operations are interrupted. How will you deliver your orders? If you don’t have backup equipment, you may need to find alternate facilities or rent equipment, which will increase your costs. What if customers can’t wait? Orders may be cancelled, which means you will suffer loss of revenue, and possible damage to your reputation. Personal injury could also result.

A typical commercial property policy does not cover loss or damage caused by:
  • Electrical arcing
  • Mechanical breakdown, and
  • Explosion of boilers and pressure vessels


Equipment breakdown insurance covers the sudden and accidental, physical damage to equipment that requires its repair or replacement. It applies to equipment in the following categories:


  1. Electrical
  2. Air Conditioning and Refrigeration
  3. Boiler and Pressure Vessel
  4. Computer and Communications
  5. Mechanical
  6. Renewable and Alternative Energy
  7. Production Systems

1. Electrical

Electrical is defined as any equipment used for the generation, transmission or utilization of electrical power.

Electrical systems represent up to 15% of a building’s value. Components include transformers, panels and cables, and because these are interconnected, excessive voltage in one component can lead to significant damage to others. For example, arcing can cause damage to a panel, as well as completely shut down an operation.


Example of an electrical loss: arcing caused a power outage to 80% of a shopping mall for 5 days. Losses exceeded $230,000.

2. Air Conditioning and Refrigeration

Air Conditioning and Refrigeration represents the number one source of breakdown claims, as it contains a variety of equipment such as pressure vessel, mechanical, electrical and electronic. And, because many air conditioning units are located on the roof, a crane or helicopter may be required to remove or replace a unit.

Example of a loss: the rupture of a pipe from the condensing unit of a meat store’s walk-in freezer caused refrigerant to escape and temperature to rise to 10 degrees Celsius. Total losses exceeded $23,000, which included over $22,000 in spoilage.

3. Boiler and Pressure Vessel

Boiler and Pressure Vessel is defined as any vessel operating at an internal pressure different to static pressure. These vessels are commonly used for heat, hot water, steam production and processing. Cookers, sterilizers and some types of cleaning equipment are other common types of pressure vessels.

Boiler and pressure vessel accidents often occur due to defective welding, scale or sediment build-up, overpressure, or the failure of control or safety devices.


The results of overpressure can be catastrophic: The hot water tank at a laundromat experienced over-pressure due to control failure and exploded. The tank was blown 20 feet from its installed location, knocking down walls and ceiling tiles, and damaging washers and dryers. Two people were injured. Losses, which included $30,000 property damage, totalled $55,000.

4. Computer and Communications

Computer and Communications include network, telephone, retail point of sale, security and fire alarm systems. These systems rely on very sensitive electronic technology, now found in almost every risk.

Common causes of computer and communications failure include power surges, loose connections, vermin, foreign objects, excessive moisture and improper use.

Example of a loss: a power surge caused total telephone system failure for a real estate developer. Losses exceeded $39,000

5. Mechanical

Mechanical is defined as any equipment used for generation, transmission or utilization of mechanical power.

Mechanical equipment includes elevator and escalator motors, ventilation fans, water pumps and motors & combustion engines. This equipment is mission-critical to most buildings and businesses.

Common causes of mechanical failure include vibration, metal fatigue, seizing, misalignment or simple human error.

Today, more types of mechanical equipment are driven by sophisticated but fragile computer technology, making them even more prone to breakdown.

Example of a loss: a furniture maker’s automated saw broke down when microprocessors were damaged by a short circuit caused by movement of the saw. Losses, including business interruption expenses, exceeded $20,000.

6. Renewable and Alternative Energy

Renewable and Alternative Energy technology can take many forms, including solar, wind, geothermal and bio-fuels.

It typically employs a wide range of electrical and mechanical equipment.

Example of a loss: A transformer on a revenue-generating solar power system was damaged by an electrical breakdown.

Total losses, including business interruption, amounted to $140,000

7. Production Systems

Production systems include: CNC manufacturing equipment, robotics, machining tools, food processing equipment.

These machines are the heart of any manufacturer and a breakdown can bring a company to a halt.

Example of a loss: An electrical event melted the motherboard and numerous switch cards of a circuit board maker’s testing machine. Total losses amounted to $185,800.

As technology and risk become more sophisticated, you can rely on The Boiler Inspection and Insurance Company of Canada to provide industry-leading products and services for your equipment exposures. To obtain a quote or for more information, contact one of our local offices.


Are you a broker? Self-rate, bind and issue commercial equipment breakdown policies in less than 5 minutes.

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