Do you need Mechanical Breakdown Coverage for your business?

Mechanical Breakdown Coverage

 Mechanical breakdown coverage has become more popular in recent years. Twenty years ago only the most die-hard businesses carried this coverage. In the last 10 years, it has become much more common for businesses to carry this valuable coverage. It has even become fairly common to find this coverage added to small business policies. However, it is rarely automatic.

Due to the technical nature of many of the mechanical breakdown losses, it often requires specialists in various types of equipment, whether mechanical or electrical, to settle mechanical breakdown claims. As your insurance advisor, we can explain what is and is not covered by your policy, but we cannot make an accurate assessment of a damaged circuit board in your processing equipment. This takes a specialist.

The mechanical breakdown coverage not only provides coverage for damage caused by an “accident,” but also provides “service interruption coverage.” Let’s start by defining an accident. For a loss to be covered, it must be sudden and accidental and not expected by the policyholder.

In a mechanical breakdown claim, the company representative will first determine if the claim was accidental. A good example of this would be a power outage. Some power outages that cause damage are covered, but again, the requirement that the loss be accidental must exist. The policy will even consider whether the damage first occurred with your utility provider, and what caused their problem. Was the cause of the outage at the power station due to a covered accident defined in your policy? If a cause of loss at your power facility was not within the scope of your policy’s coverage, then the claim was caused by your supplier’s professional actions and there would be no coverage. We would then look for a coverage trigger occurring on your premises, such as a power surge or arching in your on-premises electrical service or equipment.

 An optional coverage that you can select is service interruption coverage. This coverage extension will pay for lost income and extra expenses when operations are curtailed following a covered loss.

Call our office to discuss this coverage in more detail.