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Equipment breakdown insurance: what it covers that property insurance does not
Equipment breakdown insurance pays for sudden mechanical and electrical failure that property policies exclude, plus spoilage and lost income. What it covers.
Equipment breakdown insurance, once called boiler and machinery insurance, covers the sudden failure of mechanical, electrical and pressure equipment, such as a rooftop HVAC compressor, a switchgear panel or a walk-in cooler motor, and often the income and spoilage losses that follow. A commercial property policy generally excludes those causes of loss, which is why a business with a lot of powered equipment can have a large gap without knowing it.
Why the property policy leaves a gap
Under the ISO special causes of loss form (CP 10 30), the property policy covers fire, wind, theft and other listed or unlisted perils, but its exclusions remove a group of causes that are the bread and butter of equipment claims: artificially generated electrical, magnetic or electromagnetic energy (arcing and power surges), mechanical breakdown including rupture or bursting caused by centrifugal force, and steam boiler explosion unless fire follows. Other exclusions (wear and tear, rust, corrosion, latent defect) apply to all equipment. See commercial property exclusions: what the standard policy won't pay and basic, broad and special causes of loss forms: what each covers for the full list. Equipment breakdown is the coverage that buys back what those exclusions took away.
The flip side is that equipment breakdown forms give up what property forms already pay for. Fire, windstorm and theft are not equipment breakdown perils. If an electrical fault starts a fire, the fire damage goes to the property policy and the failed switchgear goes to the equipment breakdown policy. Most claims departments handle that split routinely, but it explains why the two coverages are usually bought together and why coordination of the deductibles matters.
What counts as a breakdown
Most U.S. programs follow the ISO Equipment Breakdown Protection Coverage Form, EB 00 20, or a carrier's own version. Under that form a "breakdown" is direct physical loss to covered equipment that requires its repair or replacement, caused by failure of pressure or vacuum equipment, mechanical failure, or electrical failure including arcing. Normal wear and tear, depletion, corrosion, erosion and damage from testing are carved out, and computer defects, errors and viruses are typically excluded as well. Insurer product pages describe the triggers in plainer language: Nationwide's equipment breakdown page lists power surges, motor burnout, boiler malfunction and operator error as causes, and notes that exclusions apply and the policy controls.
Covered equipment generally includes:
- Equipment built to operate under internal pressure or vacuum, such as boilers, pressure vessels and refrigeration systems.
- Electrical or mechanical equipment used to generate, transmit or use energy: panels, transformers, motors, compressors, pumps, production machinery.
- Communication and computer equipment.
Equipment you manufacture for sale and obsolete equipment are commonly outside the definition. Vehicles and mobile equipment generally belong under auto or inland marine coverage instead (inland marine insurance for tools, equipment and goods in transit).
The coverages inside the form
A breakdown policy rarely stops at the broken part. Depending on the form and the limits chosen, it can include:
| Coverage | What it pays for |
|---|---|
| Property damage | Repair or replacement of the failed equipment and other covered property damaged by the breakdown |
| Business income and extra expense | Lost income and added costs while operations are down, subject to a waiting period or time deductible (business interruption insurance: how business income coverage works) |
| Spoilage | Food, drugs and process materials lost to temperature or power change after a breakdown (spoilage coverage for refrigeration breakdown and power outage) |
| Utility interruption | Loss when a utility's equipment off your premises breaks down and your supply stops (utility service interruption coverage: when an outage is insured) |
| Expediting expenses | Overtime, rush shipping and temporary repairs to shorten the shutdown |
| Contingent business income | Income lost when a supplier's covered equipment breaks down (contingent business interruption insurance and supply chain risk) |
| Hazardous substance and data restoration | Cleanup and restoration costs that follow some breakdowns |
In the ISO form, several of these (business income and extra expense, spoilage, utility interruption, ordinance or law, contingent business income) are optional coverages that apply only where the declarations show a limit or "included." That is the single most common surprise: the policy has equipment breakdown, but the business income piece was never selected. The form also excludes fire, earth movement and, unless added, ordinance or law.
Where equipment breakdown sits in the market
The NAIC reports boiler and machinery as its own line. In the 2025 NAIC market share data (states and U.S. territories, summed for this site), U.S. insurers wrote about $2.77 billion of direct premium in that line. FM led with about $750 million, followed by Chubb at about $248 million and Travelers at about $221 million. The line understates the whole market, because equipment breakdown is frequently added by endorsement to a package or businessowners policy, where it is reported with that policy's line. HSB (the Hartford Steam Boiler company, part of Munich Re) says on its website that it was one of the first to offer the coverage, which it notes was formerly called boiler and machinery insurance. Whether a particular carrier includes equipment breakdown in its small business package, offers it as an optional endorsement or sells it as a separate policy is carrier-specific, so ask rather than assume.
Worked example (hypothetical)
Say a 25-seat restaurant in Ohio relies on a walk-in cooler and a rooftop HVAC unit. One summer evening a power surge burns out the cooler's compressor. By morning, $14,000 of food has warmed past safe limits, and the dining room closes for two days while a new compressor is ordered.
- Property policy only: The surge is "artificially generated electrical energy," which the special form excludes. The compressor, the food and the sales may all be uninsured.
- With equipment breakdown, spoilage and business income selected: The policy pays to replace the compressor, the spoiled food up to the spoilage limit, and the income lost after the waiting period, less the deductible. Expediting expenses might pay extra to rush the part.
- With equipment breakdown but no spoilage limit: The compressor is covered and the food is not.
The numbers are invented to show the mechanics; limits and deductibles vary by carrier.
Inspections and underwriting
Breakdown insurers often do more than pay claims. Many states require periodic inspection of boilers and pressure vessels, and the equipment breakdown insurer's engineers frequently perform that work. Rules differ by state and city; check the jurisdiction that governs your building with the state labor or fire marshal office. At underwriting, expect questions about the age and maintenance of major equipment, infrared scans of electrical panels, refrigeration service contracts, surge protection and whether you hold manufacturer warranties. A well-kept maintenance file helps the account and can help a claim.
Buying checklist
- List equipment by value: HVAC, electrical service, refrigeration, production lines, servers, elevators.
- Confirm that equipment breakdown is on the policy, and find it on the declarations rather than relying on a quote summary.
- Check which optional coverages (business income, spoilage, utility interruption, contingent) show a limit.
- Ask about the deductible: a flat amount, a multiple of daily value, or a time deductible for income.
- Ask how replacement is valued for old equipment and whether efficiency or code upgrades are paid.
- Confirm how the equipment breakdown deductible interacts with the property deductible after a loss that involves both.
- Check for exclusions on computer equipment, cyber causes and leased equipment.
Key takeaways
- Equipment breakdown pays for sudden mechanical, electrical and pressure-equipment failure that standard property forms exclude, not for wear and tear or corrosion.
- The valuable parts are often the add-ons: business income, spoilage, utility interruption and expediting expenses. Verify that each carries a limit on the declarations.
- Fire, flood and wind stay with the property policy; the two coverages divide the loss and are best bought together.
- Boiler and machinery was a $2.77 billion U.S. line in 2025, but much equipment breakdown cover rides inside package policies, so ask whether yours is included, optional or absent.