The reality of equipment breakdown in an electronic world

Almost all equipment today uses highly vulnerable electronic components that show no outward signs of damage when they fail. No signs of fire, no odd smells, no unusual noises. The equipment it runs simply stops performing as originally designed.

With no physical signs of damage, are businesses with equipment breakdown insurance still covered?

They are if their coverage has changed with the times. Let’s take a look at how things have evolved for our electronic world and how the best kind of coverage has, too.

In the days before electronics, relays and contactors were used to switch circuits on and off. By connecting many together, a complete control system could be created.

These older relay controls systems were run by a sizable power source that could cause wires or other components to arc, burn or melt. If that happened, you could see discoloration, smell burning, or hear unusual noises such as humming or chattering. 

The physical damage was evident and easily linked to the breakdown of the equipment. That evidence of physical damage was required before equipment breakdown coverage kicked in.

Today, electronic devices have replaced almost all relays used for control systems. A transistor is used as an electronic switch instead of a relay contact and are built into integrated circuits and microcomputer chips* in very large quantities.

Electronic components are very vulnerable to high-voltage transients that can instantly damage transistors on a microchip without any signs of arcing or burning.

In fact, the first sign of a failure may be when the equipment does not perform as originally designed. There are typically no other visible signs of damage to any of the circuitry. This type of failure is known as electronic circuitry impairment.

Repairing the system may involve replacing components – circuit boards, integrated circuits, computer microchip, and data storage units for instance – until it works normally. Or, if all the components are on a single circuit board, the entire board may need to be replaced – even if a single transistor fails. 

The cost to repair or replace these damaged electronics is considered an electronic circuitry impairment loss and is covered in some equipment breakdown insurance policies.

Check your policy. Make sure it covers the unique risks of equipment and technology. If it has kept pace with today’s newest risks, it has widened coverage by expanding the definition of accident to include electronic failures. It also accounts for financial loss incurred when equipment breaks down due to an accident, power surges, short circuits, centrifugal force, boiler overheating or cracking, mechanical breakdown and electronic circuitry impairment.

Ensure your customers are keeping pace with the new risks created by the electronic age we live in today. Click here for information on HSB equipment breakdown solutions for today’s equipment risks.