Equipment Insurance: Protecting Your Investments

A business’s success lies in its ability to keep its operations running smoothly. Every company has various types of equipment that play a significant role in its daily operations. Protection of these assets becomes essential to keep the business functioning consistently. Equipment insurance is an insurance policy that protects businesses from financial losses due to damage, theft, or loss of equipment.

What is Equipment Insurance?

Equipment insurance is a policy that covers the replacement or repair of essential equipment like machinery, computers, or office furniture. It protects businesses from financial loss arising from various equipment-related incidents, including:

Incidents covered under equipment insurance:
Incidents not covered under equipment insurance:
Theft
Natural disasters like floods and earthquakes
Vandalism
Wear and tear due to regular use
Accidental damage
Intentional damage by employees

Equipment insurance policies usually cover equipment at the business’s premises or while in transit, depending on the policy and coverage elected by the business. The insurance premiums for equipment insurance policies vary based on the type of equipment, its value, and the level of coverage needed.

Why Do You Need Equipment Insurance?

If your business relies on expensive equipment, you need equipment insurance to protect your investment. A malfunctioning or broken piece of equipment can result in huge losses for your business, including:

Losses arising from equipment breakdown:
Lost income due to halted operations or production
Costs of repairing the equipment
Costs of renting replacement equipment
Costs of expedited shipping for replacement parts
Costs of lost productivity and revenue

Equipment insurance can help mitigate these losses and potentially prevent a business from going bankrupt. Equipment insurance covers most equipment breakdowns, theft, and accidental damage or losses.

What Does Equipment Insurance Cover?

Equipment insurance covers the replacement, repair, or reimbursement of your equipment losses or damages. It can provide coverage under the following circumstances:

Types of coverage provided by equipment insurance:
Replacement cost coverage: This policy provides coverage for the cost of replacing the equipment, regardless of depreciation.
Actual cash value coverage: This policy provides coverage for the actual cash value of the equipment and deducts depreciation costs.
Business interruption coverage: This policy provides coverage to cover losses incurred due to the disruption of business operations caused by equipment breakdowns or damages.
Transit coverage: This policy provides coverage to protect your equipment while it’s being transported between locations or in transit.
Named perils coverage: This policy provides coverage for specific perils like theft, vandalism, and accidental damage.

Equipment insurance policies can be customized based on the specific needs of a business. Factors like industry, equipment type, and equipment value determine the types of coverage offered in each insurance policy.

How Does Equipment Insurance Work?

Equipment insurance typically works on the reimbursement principle. Suppose an insured business suffers a loss or damage to equipment covered under the policy. In that case, the policyholder pays for damage repair or replacement upfront, and the insurance company reimburses the business for the costs of the repairs or replacement of the equipment up to the policy limits.

The equipment insurer’s role is to investigate the loss and collect all necessary details from the policyholder about the incident, including the equipment involved, time of the incident, cause of the loss, and the estimated replacement cost of the damaged equipment. Once the equipment insurance company reviews the submitted information, they will decide whether to approve or reject the claim based on the policy’s terms and conditions.

Equipment insurance policies come with deductibles, a predetermined amount of money that the policyholder pays out of pocket before the insurance coverage kicks in. Most deductibles range from $500 to $10,000 and can be customized based on the policyholder’s financials and insurance needs.

How to Purchase Equipment Insurance?

Any business that owns or leases equipment should consider purchasing equipment insurance. Equipment insurance coverage can be purchased through various sources, including:

1. Independent insurance agents: Independent insurance agents work with multiple insurance companies and can help businesses find the best coverage for their needs.

2. Insurance companies: Insurance companies offer equipment insurance policies and have various coverage options and discounts available.

3. Online marketplaces: Online marketplaces like Insureon, Policygenius, and Coverhound offer equipment insurance policies from multiple insurance providers in one place, simplifying the coverage-purchasing process.

FAQ

What kind of equipment can be covered under equipment insurance?

Equipment insurance can cover any equipment that a business uses to operate. Examples of equipment covered include machinery, computers, furniture, and vehicles.

How much does equipment insurance cost?

The cost of equipment insurance varies based on several factors such as the equipment’s value, type of equipment, location, and policy coverage limits. Businesses can expect to pay anywhere between $500 to $5,000 annually for equipment insurance.

What is the difference between replacement cost coverage and actual cash value coverage?

Replacement cost coverage reimburses the policyholder for the cost of a new equivalent piece of equipment without regard to depreciation. Actual value coverage, on the other hand, pays out the current value of the equipment considering depreciation.

What is a deductible?

A deductible is a pre-determined amount that the policyholder pays out of pocket before the insurance coverage kicks in.

What if my equipment breaks down and doesn’t cause property damage?

Most equipment insurance policies cover mechanical breakdowns and damages that don’t necessarily affect property. It’s best to check with your insurance provider for the specific limits of coverage for each policy type.

Conclusion

Equipment insurance is an essential coverage for any business that relies on expensive equipment to carry out its operations. It provides protection against unexpected losses and damages that can result in significant financial costs for businesses. Choosing the right equipment insurance policy can help mitigate business risks and keep the business running smoothly.