Insurance Insights ~ September 1998

Equipment Breakdown Insurance -- Common Questions and Objections

What is equipment breakdown insurance?

First we should point out that the perils of Mechanical and Electrical Breakdown to all types of equipment are specifically EXCLUDED in most all Property coverages. Equipment Breakdown insurance pays for the cost to repair or replace equipment or machinery that breaks down suddenly and accidentally. Most all equipment that simply plugs into an electrical outlet is considered an object under this policy. It can also cover business income losses that occur when that equipment breakdown interrupts your business operations. It also covers the cost to speed restoration of business operations and spoilage loss.

Why do I need it?

Because the cost of breakdown can be significant and these breakdowns occur often enough for there to be a legitimate risk to your profits and your business. As technology increases equipment tends not to be repaired anymore. Replacement cost Equipment protection is vital to all businesses today where there may not have been a significant exposure 10 years ago. 70% of all the losses we pay involve Electrical injury to equipment or the electrical distribution system itself.

What type of breakdowns are covered?

This coverage protects equipment to what is likely to occur: short circuits, electrical arcing, motor burnout, mechanical breakdown and the like. Equipment breakdown due to mechanical or electrical breakdown is more common than a fire.

If equipment breaks, it is not expensive to fix.

You may be right, the part that breaks is sometimes not expensive. Yet machinery and equipment area generally part of an integrated system. When equipment breaks down, a small flaw can quickly lead to another problem and another until the whole system collapses. A power surge can damage numerous types of equipment in one surge. Beyond the cost to fix everything, also consider the cost of business interruption, lost income and food spoilage as a result of your equipment’s failure.

I don’t want to spend the money.

We appreciate your concerns about money. That’s why we are recommending this insurance. Ask yourself, "How much do you have invested in your equipment? How much income would I lose per week if failure to a piece of equipment interrupted my business?" These costs can add up. Small failures to your equipment may be able to be paid from your current budget, but larger, unexpected failure can disrupt the entire operation.

I don’t have a boiler.

Equipment breakdown covers over 1,000 types of equipment, besides boilers. It protects electrical systems, air conditioning and refrigeration, mechanical equipment, modern office equipment in addition to heating systems such as boilers. Boilers are only one of a thousand types of equipment insured under this program.

I already have a maintenance contract.

Great, maintenance contracts cover routine care such as cleaning or adjustment. But most don’t pay for damage due to operator error which is the cause of over 35% of all equipment breakdowns. Equipment breakdown insurance does provide this coverage. Maintenance contracts don’t pay for business income losses or spoilage of your stock or inventory resulting from breakdown…Equipment insurance does. Plus, if you have equipment that requires inspection according to State of other jurisdictional laws, you get inspection service along with this insurance. This is a service you would otherwise have to purchase from the State at a rate of $55 to $120 per inspection.

My equipment is covered by warranty.

OK. What about your business income? Will the warranty pay you for lost profits or your continuing expenses in the event a breakdown interrupts your business? Does your warranty cover power surges or operator stupidity? Equipment breakdown insurance does.

Why haven’t you told me about this before?

As your business has grown, so has your total investment in equipment. Technology increases every year which makes you more and more dependent on your business equipment. Since the value of your equipment is higher now than before, this insurance now makes sense.

The following chart may help clear up some of the coverage confusion between Warranties, Maintenance Contracts and Equipment Insurance....

Are You In The Top Ten?

So, you thought only owners of sports cars or luxury cars had to worry about their cars being stolen, right? Well, did you know that most of the cars on the top ten list for theft are popular family models that are probably similar to the ones in your garage?! Does your family car fall into the "Top Ten"?

1. Toyota Land Cruiser
2. Mitsubishi Montero Sport Utility
3. Mercedes-Benz S-Class Sedans
4. Acura Legend Coupe
5. BMW 318i/318I Convertibles
6. Mercedes-Benz SL-Class Roadsters
7. Acura Legend Sedan
8. Lexus GS300
9. Nissan 300ZX
10. BMW 318i/318I Coupe

Now that we have identified the top choices for car thieves, how do you protect your car from becoming another statistic?

First, use good old common sense. Always remove the keys from the car, even if you are only leaving your car for a short time.

Remember to keep your garage door closed and locked. If you park on the street or in a parking lot, choose a well-lit area.

Make sure to take your stereo accessories and cell phone with you. If you are unable to carry them along, lock them in the trunk, where they will be out of sight.

You can take further precautions by installing one of the many theft deterrents that are available on the market today. These range from the steering wheel locks (The Club), to vehicle identification number etching or an alarm system.

Alarm systems can range from sounding an alarm when someone tries to enter your car to a system that will disable the car and prevent a would-be thief from starting it. There are even systems that transmit a signal, so that when a car is stolen, police can track it.

By taking these precautions, car thieves will have to look elsewhere for their livelihood, and at the same time, we can help keep a lid on our auto insurance bills!

INSURANCE INSIGHTS is an electronic newsletter published monthly by G. C. Weimer Associates, Inc. Information contained herein is accurate to the best of our knowledge and belief as of 9/1/98. If you have a topic of interest for a future issue, e-mail us at info@gcwinsure.com.