How to properly insure building equipment and production machinery

When many people think of business insurance, they think of protecting their buildings from natural disasters such as fire, water and wind. However, most policies that insure against those dangers leave you exposed to something just as dangerous: production equipment and machinery breakdown.

“The loss of income that may be associated with a breakdown could be substantial,” says Nancy Hamilton, account executive with ECBM Insurance Brokers and Consultants. “If your operations cease, then you are not generating revenue and you’re not continuing your business.”

Smart Business spoke with Hamilton about how to ensure that your company’s revenue doesn’t come to a crashing halt if your equipment does.

What are the major risks involved with building equipment and production machinery?

The biggest risk is the loss of income associated with a breakdown loss. If your production machinery goes down, it can result in significant loss of revenue. This is especially important if your product can become spoiled and useless if your equipment fails. Refrigeration, cold storage, warehousing and food storage all have a risk of spoilage.

Most businesses rely on their equipment to maintain operations and generate income. With today’s new technology, businesses are at an even greater risk because they have become more dependent on equipment that has fragile, complex components. This high-tech equipment has a greater risk of breaking down. This is a problem because not only could new technological equipment have complex components that could cause a breakdown, but it could be more expensive to replace, as well.

How can a company protect itself against those risks?

First, it could purchase an equipment breakdown policy. These policies are formally called boiler and machinery coverage and will provide coverage that ensures a breakdown is covered.

Equipment breakdown can be prevented with proper maintenance, and most equipment breakdown policies include inspection services and loss control services. Also, companies can avoid losses from production machinery breakdowns by conducting a thorough review of their business exposure. This review should take place with the help of an insurance professional or risk manager to ensure that your company is properly covered.