Equipment breakdown coverage pays for sudden, accidental damage to machinery and electrical systems from causes your property policy excludes: mechanical breakdown, electrical arcing, and steam boiler explosion. It covers repairing or replacing the failed equipment, the property it damages, and, when tied into business income coverage, the revenue you lose while operations are down.
Most business owners assume their commercial property policy covers the equipment that runs the business. It does, but only against outside forces like fire, wind, and theft. When the machine destroys itself from the inside, a burned-out compressor, an arcing panel, a cracked boiler, the property policy steps aside. Equipment breakdown coverage is the piece that steps in.
Equipment Breakdown Coverage
Equipment breakdown coverage insures against sudden, accidental breakdown of covered equipment, mechanical failure, electrical arcing, and steam explosion, causes that standard commercial property policies exclude.
What does equipment breakdown coverage pay for that property insurance excludes?
The gap sits in your property policy's exclusions. The Causes of Loss Special Form (CP 10 30) excludes mechanical breakdown, including rupture or bursting caused by centrifugal force. It excludes damage from artificially generated electrical, magnetic, or electromagnetic energy, which sweeps in electrical arcing, current surges, and electromagnetic pulses that damage wiring, devices, and networks. It also excludes explosion of steam boilers, steam pipes, steam engines, and steam turbines you own, lease, or operate.
The policy gives back some resulting damage, if a boiler explosion starts a fire, the fire damage is covered, but the boiler itself and everything the excluded cause destroyed directly is on you. Equipment breakdown coverage exists to pick up exactly those causes.
Here is how the pieces fit together for the three big excluded causes:
| Cause of loss | Your property policy | With equipment breakdown coverage |
|---|---|---|
| Mechanical breakdown (seized motor, thrown rotor) | Excluded, except resulting elevator collision damage | Covered |
| Electrical arcing or artificial current surge | Excluded for the damaged wiring, devices, and systems | Covered |
| Steam boiler, pipe, engine, or turbine explosion | Only resulting fire or combustion explosion is covered | Covered, including the boiler itself |
| Spoilage from breakdown of refrigeration equipment | Temperature change from mechanical breakdown is excluded | Typically covered by spoilage coverage options |
ISO gives you two vehicles for the coverage. The Equipment Breakdown Cause of Loss endorsement (CP 10 46 10 12) adds "breakdown" of "covered equipment" to your property policy's covered causes of loss. The Equipment Breakdown Protection Coverage Form (EB 00 20 01 13) provides similar protection as its own coverage part, which some insurers and specialty markets prefer. Either way, wear and tear stays excluded, the trigger is a sudden, accidental breakdown, not gradual deterioration.
Why is it called boiler and machinery insurance?
Older policies and older brokers still call this line boiler and machinery, and the name records where it started. In the steam-powered 1800s, boiler explosions were a routine industrial catastrophe, leveling factories and killing workers. The Hartford Steam Boiler Inspection and Insurance Company, founded in 1866, built the model that still defines the line: inspect the boiler first, insure it second, and prevent the loss rather than just pay for it. Notice that "Inspection" comes before "Insurance" in the company name.
As factories electrified, the same insurers extended coverage from steam vessels to motors, generators, and electrical apparatus, and boiler and machinery gradually became equipment breakdown. The modern name fits the modern buyer. A dental office with no boiler in the building still runs on compressors, sterilizers, servers, and an HVAC system, and every one of them can fail in ways the property policy excludes.
What equipment does it cover?
Covered equipment is defined broadly in modern forms, and it reaches well past the boiler room. The categories a typical equipment breakdown policy covers:
- Boilers and pressure vessels: steam boilers, hot water heaters, and other fired or unfired vessels operating under pressure or vacuum.
- Electrical distribution equipment: panels, transformers, switchgear, and the building wiring that arcing destroys.
- Air conditioning and refrigeration: chillers, compressors, walk-in coolers, and the systems whose failure spoils inventory.
- Mechanical equipment: motors, pumps, engines, fans, and other machines with moving parts, including rupture from centrifugal force.
- Computers and communications gear: servers, phone systems, and diagnostic equipment vulnerable to power surges.
- Production machinery: the presses, lines, and specialized units that actually make what you sell.
Check the schedule anyway. Definitions vary between insurers, some equipment needs to be specifically described, and equipment under testing sometimes carries separate terms.
Does equipment breakdown coverage replace lost income?
It can, and for many businesses the income piece is worth more than the hardware. When CP 10 46 is attached, breakdown becomes a covered cause of loss under your whole commercial property program, so a business income form like CP 00 30 responds to a shutdown caused by breakdown the same way it responds to a fire.
The standalone EB 00 20 route offers its own business income and extra expense options. Without either, a burned-out transformer that closes you for three weeks produces no property claim and no income claim at all.
Spoilage rides the same rails. The property form's limitations exclude damage from temperature or humidity changes that result from breakdown of refrigerating, cooling, or humidity control equipment, which is precisely how a grocery store or restaurant loses its inventory. Spoilage coverage paired with equipment breakdown closes that loop. Ask your broker to walk through the sequence: what fails, what it ruins, and how long you are down.
Why does the insurer inspect your equipment?
Equipment breakdown is the one line of insurance where the inspection is part of the product. Insurers writing this coverage employ inspectors who examine boilers and pressure vessels on a regular cycle, flag developing problems, and get failing components repaired before they burst.
That tradition is old enough to be written into the standard policy: the ISO Common Policy Conditions state that inspections relate only to insurability and premium and are not safety warranties, then carve out an exception for inspections made relative to certification of boilers, pressure vessels, or elevators under state or municipal statutes. In many jurisdictions, the insurer's inspection is the legally required certificate inspection, so the coverage does double duty as compliance. For a buyer, that means the premium purchases engineering eyes on your most dangerous equipment, not just a promise to pay after it fails.
Frequently asked questions
Is equipment breakdown coverage the same as a warranty or service contract?
No. A warranty covers defects in a product, and a service contract covers maintenance and wear. Equipment breakdown insurance covers sudden, accidental failures across all your covered equipment regardless of brand or age, plus the resulting property damage, spoilage, and lost income that no warranty touches.
Does my property policy cover a power surge that fries my computers?
Generally no. The Causes of Loss Special Form excludes damage from artificially generated electrical energy, including arcing and current surges, to wiring, devices, systems, and networks. Equipment breakdown coverage is the standard way to buy that exposure back.
Do I need equipment breakdown coverage if I don't have a boiler?
Almost certainly yes. The coverage long ago outgrew boilers, and today the most frequent claims involve electrical distribution equipment, HVAC systems, refrigeration, and electronics. If your business stops when a compressor, transformer, or server fails, you have the exposure.
Should I buy the endorsement or a separate equipment breakdown policy?
Both work, and the practical difference is packaging. The CP 10 46 endorsement folds breakdown into your existing property policy and its business income coverage, which keeps one insurer on the whole claim. The standalone EB 00 20 form can offer broader definitions and specialist claim handling. Compare limits, deductibles, and how each treats income losses.
This guide is for educational purposes and summarizes standard ISO policy language. Your policy's specific terms, conditions, and endorsements control. Talk to a licensed broker about your actual exposures.