Boiler & Machinery Equipment Breakdown Insurance

The Rising Challenge of Equipment Breakdown

Equipment breakdowns have become as frequent and severe as fire losses in terms of claims. Breakdown incidents, particularly involving boilers and other machinery, now constitute nearly one-third of all property-related losses. This issue is exacerbated by two significant macroeconomic trends:

1. Shortage of Skilled Workers: Experienced workers are retiring or switching jobs, leaving a knowledge gap that contributes to human error. Almost half (43%) of all equipment losses are due to inadequate operator training, highlighting the importance of effective knowledge transfer.
2. Supply Chain Disruptions: Delays in procuring parts have made routine maintenance crucial. However, many companies neglect this, with three-quarters of equipment losses attributed to lack of maintenance.

When equipment fails, it results in downtime, financial losses, and operational challenges for plant operators. These breakdowns, often due to electrical and mechanical failures, are typically not covered by commercial property insurance policies. This makes boiler and machinery insurance essential, prompting risk managers to consider boiler and machinery risk engineering to identify and mitigate unique risks.

Boiler and Machinery Insurance

Boiler and machinery insurance covers financial losses and physical damage resulting from equipment breakdowns or failures. This coverage is vital for business continuity, as the cost of replacing machinery, such as boilers or transformers, can be substantial. Traditional business property insurance policies often exclude these losses. It's also important for businesses to have continuity plans, ensuring the availability of critical spare parts and strategies to manage downtime.

Coverage of Boiler and Machinery Insurance

Boiler and machinery insurance typically covers the costs of repairing or replacing malfunctioning equipment, business interruption and downtime during repairs, and damage to goods and products resulting from the malfunction. It generally excludes wear and tear, covering only incidents that cause a sudden operational halt.

Equipment Breakdown and Boiler and Machinery Insurance

The terms "equipment breakdown" and "boiler and machinery" are often used interchangeably. However, insurance providers may have slight variations in coverage definitions. It is essential to ensure that the insurance purchased covers the specific equipment intended for protection.

Boiler and Machinery Equipment Breakdown

Boiler and machinery equipment breakdown refers to failures or issues with critical machinery. Examples include a boiler failing to maintain proper temperatures, a short-circuited fire protection alarm, or a machine component burning out and halting production. While some repairs are straightforward, others may require critical spare parts or complete machinery replacement.

Understanding Boiler Breakdown

Boiler breakdowns occur when a boiler malfunctions or suffers damage. Severe consequences can include boiler explosions causing fires and injuries. Over time, rust and corrosion can lead to leaks and breakdowns. Other issues include lack of hot water or heating due to failing temperature sensors, motor replacements, or malfunctioning valves. The age of the equipment can also contribute to breakdowns.

Commercial boilers are complex and require examination by trained professionals. Most U.S. states mandate annual internal and external inspections for high-pressure boilers (15 psi or higher). Other equipment, such as air and water storage tanks and low-pressure boilers, typically have inspection intervals ranging from one to five years.