Equipment Breakdown Coverage

Equipment breakdown coverage, formerly known as boiler and machinery insurance, fills a critical gap in the standard commercial property policy. While property insurance covers equipment damage caused by external perils such as fire and wind, it does not cover equipment that fails due to internal mechanical or electrical causes. When a boiler cracks from pressure, an elevator motor burns out, or an HVAC compressor fails from an electrical surge, the standard property policy does not respond.

Apartment buildings rely on a wide array of mechanical and electrical systems, including boilers, water heaters, HVAC units, elevators, fire pumps, electrical panels, and generators. As these systems age, the likelihood of mechanical failure increases. The cost of repairing or replacing a commercial boiler, elevator motor, or HVAC system can range from $10,000 to $100,000 or more.

Equipment breakdown coverage pays for the cost of repairing or replacing the failed equipment, any resulting damage to other property (such as water damage from a burst boiler), loss of income during the repair period, and the cost of temporary equipment to maintain building services. Some policies also cover the cost of testing and inspection required after a breakdown. This coverage is especially important for mid-rise and high-rise buildings with complex mechanical systems and for any property with aging equipment.