Engineering Insurance

Machinery Breakdown Insurance 

If your business owns, operates or depends upon some type of equipment or machinery to generate revenue, you need machinery breakdown insurance, should they fail due to a sudden and unforeseen event, which is insured. Equally as important, you need reduction in Gross Profit cover following Machinery Breakdown,should one of your key pieces of machinery failed suddenly (due to an insured event). A key piece of machinery which is not insured for breakdown and reduction Gross Profit following Machinery Breakdown, could have catastrophic financial consequences for your business.

How is Machinery Breakdown Insurance different from warranties or service contracts?

Warranties and service contracts are important, but they don’t cover many of the common causes of machinery breakdowns. Maintenance contracts cover routine service such as cleaning or adjustment, but they don’t pay for accidental damage due to operator error, the cause of over 35% of machinery breakdowns. Machinery Breakdown insurance can cover this. 

Warranties and maintenance contracts also don’t pay for business interruption or income loss resulting from breakdown. Nor do they pay for spoilage, damage to surrounding property or extra expenses to restore operations. Machinery Breakdown insurance can cover all these risks.

Loss of Profits following Machinery Breakdown

In order for any business to start production there are certain services that are vital to any process of manufacture. Depending on the product, the basic services can be any combination of electricity, steam, gas, water or compressed air. The starting point is therefore the machinery, which causes the disruption of these services. Taking electricity as an example, there could be high-tension switchgear, transformers, low-tension switchgear, cabling and electrical distribution boards. Failure of this equipment, particularly the high-low-tension switchgear and the transformer will halt production completely. This consequent reduction in turnover could be business threatening.

The machinery breakdown insurance policy faithfully follows the property insured under the Machinery Breakdown policy. In other words, if you have failed to cover the breakdown risk under the Machinery Breakdown section the resultant reduction in turnover is not claimable under this policy in terms of a plant and machinery breakdown loss.

Deterioration of Stock

Primarily, this type of insurance is an extension to the Machinery Breakdown policy. 

Essentially, the cover is restricted to deterioration or putrefaction of perishable commodities which by their very nature, require a controlled environment to retain their normal marketable condition.The important point to bear in mind is that cover is restricted to insurance provided under the Machinery Breakdown policy where there must be an admitted indemnifiable claim before this policy comes into operation.