Do I Need Equipment Breakdown Coverage for My Business?

Most business owners know the importance of protecting their buildings, vehicles, and inventory, but fewer realize how vulnerable their essential systems and equipment are to unexpected failure. From HVAC systems and computer servers to refrigeration units and point-of-sale devices, today’s operations rely on technology that can suddenly suffer direct physical damage.

Learn how equipment breakdown insurance can help safeguard your business from costly disruptions.

When Equipment Breakdown Brings Business to a Halt

Even minor system failures can lead to significant costs and downtime for a business. The examples below highlight the importance of equipment breakdown coverage:

Scenario 1: An artificially generated electrical power surge hits a busy restaurant during peak hours, damaging the A/C compressor, walk-in cooler, and fryers. The restaurant must close until the equipment can be repaired or replaced when it cannot safely store food or cool the dining area.

Scenario 2: A medical office loses access to its scheduling and billing systems after the server fails to reboot following a brownout. The source of the problem turns out to be a  controller board that suffered electrical damage. There’s no  damage to the naked eye, but the impact is immediate. Systems need replaced, data needs restored,patients must be rescheduled, and revenue is lost.

Scenario 3: A small grocery store’s refrigeration system dies unexpectedly on a Friday night when the compressor seizes. Most of the store’s perishable inventory has spoiled by the time repairs are made. Equipment breakdown coverage helps the owner replace the system and recover the cost of the lost goods without dipping into reserves or taking on new debt.

“These types of losses happen every day,” Carroll notes. “And they can cost far more than people expect—especially when you factor in lost income or reputational damage.”

Did You Know? A single four-hour outage in one refrigerated display case for seafood and meats can result in thousands of dollars in lost sales. 

What Equipment Breakdown Insurance Covers—And Why It Matters

Modern businesses run on essential systems. When one of those systems fails, the ripple effect can be immediate: operations stall, revenue dips, orders back up, and customers are left waiting. Equipment breakdown insurance is not just about repairing or replacing physical damage; it’s about protecting the continuity of business operations. Whether it’s the refrigeration units in a restaurant, the computer servers in an office, or the control panels in a manufacturing plant, Equipment Breakdown insurance is designed to provide coverage for the systems that keep your business running.

Coverage typically includes:

• Electrical distribution systems and control panels
• HVAC and refrigeration systems
• Computer servers and office tech
• Boilers and pressure vessels (including required inspections)
• Production equipment and specialty machinery

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Key protections may include:

• Direct physical damage from electrical, mechanical, or pressure systems failure
• Business Income coverage for lost net income due to equipment breakdown
• Spoilage coverage for perishable goods
• Data restoration for recovering lost files or data
• Extra expense to keep operations moving during repairs or replacement of equipment 

Common Myths About Equipment Breakdown Insurance

Despite how common these scenarios are, equipment breakdown insurance is often misunderstood. Let’s explore a few misperceptions about this critical coverage:

Myth #1: My property insurance already covers this.
Most commercial property policies exclude mechanical breakdowns, electrical failures, and pressure system explosions. 

“There’s often an assumption that property insurance is all-encompassing, but that’s rarely the case,” says Carroll. “Equipment breakdown helps close that gap.”

Myth #2: I lease my equipment, so it’s not my problem if it fails.
Even if you don’t own the equipment, you may still be responsible for damages when something goes wrong. Many leases require the tenant to insure property owned by the landlord.

Learn More: Equipment Breakdown Coverage for Homeowners

Myth #3: Only manufacturers and factories need this type of coverage.
Restaurants, dental offices, retail stores, breweries, and law firms rely on specialized equipment. A failed point-of-sale system or overheating server can impact any business, large or small. Most Business Personal Property that generates, transmits or utilizes energy may qualify as covered equipment under Equipment Breakdown coverage.

Myth #4: Equipment breakdowns are rare.
Equipment breakdowns are common. Power surges, system overloads, and operator errors are everyday risks. The cost of repair, downtime, and lost data adds up fast.

The Central Difference

While proper coverage helps your business recover from equipment failures, the best approach is to take proactive steps to avoid these issues entirely. Routine inspections, proper system upkeep, and staff training are important in reducing the risk of mechanical or electrical breakdowns. Preventive measures like voltage monitoring, regular filter changes, and firmware updates can catch small issues before they lead to costly downtime or repairs.

At Central, prevention is just as important as protection. Our loss control specialists work with policyholders to implement practical strategies that keep essential systems running safely and efficiently. Talk to an agent about how our equipment breakdown coverage can protect your business.