Equipment Breakdown Insurance Australia

Equipment breakdown insurance pays when a machine you own suffers sudden and unforeseen mechanical or electrical failure, including a burnt-out motor, a failed switchboard, a short circuit, a power surge, or a bearing that lets go. The cover applies while the machine is running, sitting idle, or being serviced. Depending on what you insure, it can extend to the machine being taken apart for repair.

The cover takes in refrigeration and cool room plant, air-conditioning and mechanical services equipment, boilers and pressure vessels, production and process machinery, switchboards and electrical distribution equipment, lifts, and office or computer equipment where that matters to how you operate.

For most businesses, two extensions matter more than the base cover. Deterioration of stock pays for the food, produce, or temperature-sensitive goods that spoil because the fridge or freezer keeping them cold failed. An increased cost of working or loss of income extension pays what it costs you while the machine is being replaced. A burnt-out motor that stops your production line is a business interruption loss, not only a machinery repair.

Equipment breakdown cover does not replace the building or property cover that responds when something external damages a machine: a storm, a fire, a vehicle backing into a switchboard. Who holds which cover, owner or tenant, is set out on commercial property insurance.

A manufacturer's warranty only covers a machine for a set period. It exists to fix the manufacturer's own defects, not to pay for the stock that spoiled or the production day you lost while the machine was broken. A service or maintenance contract keeps a machine running and catches small problems early, but it does not pay to replace a motor that has burnt out. Your property policy, the one you assume covers "the building and everything in it", generally only responds when something from outside damages a machine.

A CIB client bought a piece of specialised equipment worth around $70,000, a laser hair removal machine. Equipment breakdown insurance was recommended at the time, with clear advice to have it in place before the manufacturer's warranty ran out. Life got busy, the warranty lapsed, and the cover behind it was never arranged. Not long after the warranty ended, the machine suffered a mechanical failure. With no equipment breakdown cover in place, the entire repair cost landed on the business. A warranty has an end date. The financial risk sitting behind the machine does not.

Equipment breakdown is not a high-volume line for us. We place it for two kinds of client: businesses running expensive, purpose-specific machinery such as a CNC machine, and commercial building owners insuring a large air-conditioning plant. If that building is an office and you run your own business from it, office insurance sets out what we check on the air conditioning and the breakdown cap on your schedule. If you run neither kind of equipment, this cover may not be worth adding, and we will tell you that rather than push it.

Where a standalone policy does earn its place is the wiring. On the business pack wordings we place, the machinery and electronic equipment breakdown sections bundled into a standard package expressly exclude the cost of replacing the wiring connected to whatever failed. In our experience the switchboard itself usually sits in that same gap, because a bundled breakdown section is written around the machine, not the electrical infrastructure feeding it. A standalone equipment breakdown policy is generally the only way to close that gap and cover the switchboard and the wiring around your machinery.

If your machinery is imported or custom-built, check how long the income-loss or increased cost of working cover behind it runs, because parts for specialised equipment can take months to arrive and be commissioned, not days. Our general guidance on indemnity periods follows the same thinking: we strongly recommend 24 or 36 months, depending on your business, and 18 months is the minimum.

If a machine failing would spoil your stock, stop your production, or leave you liable for a building system a tenant assumed you would fix, this cover is for you.

That means cafes, butchers, restaurants, and any food or produce business running refrigeration, as well as manufacturers and producers running motors, compressors, and process lines. It also means farms running refrigeration, dairy plant, or irrigation systems (see Farm Insurance), and warehouse and industrial operators running climate-control or process equipment (see Warehouse Insurance and Industrial Building Insurance). It also means commercial landlords who own the building's air-conditioning, lifts, or switchboards, even where the lease makes the tenant responsible for day-to-day servicing (see Commercial Landlords Insurance for the landlord and tenant split).

Assuming your property policy already has you covered. Ask directly whether equipment breakdown is a separate section on your policy schedule, because on many packages it is optional, not automatic.

Treating a warranty or service contract as insurance. Neither covers the stock that spoiled or the production you lost while you waited.

Leaving deterioration of stock switched off. If your business depends on refrigeration, the machine is rarely the expensive part of a claim: a cool room full of produce or a butcher's display fridge can hold more value in stock than the failed compressor costs to replace.

Assuming an old machine will be fully replaced. Some breakdown policies will only pay the estimated cost of parts still available if your machine is older or imported, which can leave you short if the part cannot be sourced at that price.

A note on all four: we place equipment breakdown far less often than building or property cover, so we do not have enough of our own claims history to say which of these mistakes costs most at claim time versus renewal. What we can say is that on the equipment breakdown claims we have handled, every one has been paid.