Equipment Breakdown Insurance for small businesses

$22

Median monthly premium for equipment breakdown insurance

Source: Insureon

Equipment value or blanket limit ($25K–$500K typical for small business)

Most common coverage limits

Carriers we cover for equipment breakdown insurance

Standard commercial property and BOP policies have a specific exclusion that catches business owners off guard at claim time: they do not cover mechanical or electrical breakdown of equipment. A walk-in freezer's compressor fails, spoiling $40,000 of inventory. A restaurant's commercial dishwasher motor burns out, halting service. A manufacturing facility's CNC machine controller shorts out, stopping production. None of these are covered under standard property policies — they require equipment breakdown insurance (also called boiler and machinery insurance) as a separate coverage.¹

Equipment breakdown is one of the most common coverage gaps in small business insurance, and one of the cheapest to fill. Standalone or endorsement premiums typically run $20 to $150/month for most small businesses; the coverage commonly pays out within months of being added.

This page covers what equipment breakdown actually covers, the equipment categories that trigger coverage, who needs it, and how it interacts with commercial property and inland marine.

What equipment breakdown insurance covers

Equipment breakdown policies cover sudden and accidental physical damage to equipment caused by:²

Mechanical breakdown. Pumps failing, motors burning out, gears breaking, bearings seizing.
Electrical breakdown. Power surges, short circuits, arcing, electrical failure of motors and controllers.
Boiler and pressure vessel explosion. Steam boilers, hot water heaters, compressed air tanks, refrigeration systems under pressure.
Centrifugal force damage. Damage from rotating equipment (pumps, fans, motors) spinning out of balance.
Operator error in some forms. Sudden, accidental operator-caused damage to equipment, where included in the policy.

Coverage typically extends to:

Equipment repair or replacement cost — the direct loss to the equipment itself.
Property damage caused by the breakdown — water damage from a failed sprinkler system, smoke damage from an electrical fire.
Spoilage — perishable inventory ruined by a failed refrigeration system. This is the highest-frequency claim type for restaurants and food service.
Business income loss — lost revenue and continuing expenses during the equipment downtime, typically with a 24 to 72 hour waiting period.
Expediting expenses — premium-cost emergency repair, parts, or temporary replacement equipment to minimize downtime.

Equipment categories typically covered

Common categories under most policies:³

HVAC and refrigeration. The single largest category by claim frequency. Walk-in freezers, walk-in coolers, rooftop HVAC units, refrigerated display cases, ice machines.
Electrical systems. Transformers, switchgear, generators, electrical panels, motor starters.
Boilers and water heaters. Commercial water heaters, steam boilers, hot water boilers, hydronic systems.
Production equipment. CNC machines, presses, conveyors, packaging equipment, food processing equipment.
Computer and electronic equipment. Servers, point-of-sale systems, medical imaging equipment, specialized electronic equipment.
Communication systems. Phone systems, networking equipment, security and fire alarm panels.
Vehicle lifts and shop equipment. Hydraulic lifts, air compressors, welders, specialty tools.

The specific equipment covered varies by policy form. Most policies are written on a comprehensive basis covering all equipment up to the policy limit, with some specialized equipment requiring scheduled coverage (specifically listed and rated).

Who needs equipment breakdown insurance

The clearest cases:

Restaurants and food service. Refrigeration failure causing inventory spoilage is the highest-frequency claim category in equipment breakdown. A walk-in freezer compressor failure can destroy $20,000 to $50,000 of inventory in 24 to 48 hours.
Healthcare practices. Medical equipment, imaging equipment, lab equipment — all expensive to replace and operationally critical.
Manufacturers and processors. Production equipment failure halts revenue immediately and is expensive to repair.
Retail with refrigeration. Convenience stores, grocers, specialty food retailers, florists.
Hospitality and lodging. HVAC, hot water, and elevator equipment failure can shut down operations.
Cleaners and dry cleaners. Specialized equipment with high replacement cost.
Auto repair shops and service businesses with shop equipment. Lifts, alignment equipment, diagnostic computers.

Less critical for:

Pure professional services with minimal equipment beyond office computers.
Businesses with limited equipment value (under approximately $10,000 to $25,000 total equipment value).
Pure-digital operations with cloud-based infrastructure rather than on-premises equipment.

What equipment breakdown does not cover

Standard exclusions:²

Wear and tear, gradual deterioration, corrosion. Equipment breakdown is for sudden, accidental events — not slow degradation. Maintenance failures, age-related deterioration, and gradual wear are excluded.
Damage from external events. Fire, vandalism, theft, flood, weather damage are covered under commercial property or inland marine, not equipment breakdown.
Software errors and configuration issues. Hardware failure is covered; software bugs and configuration mistakes typically are not.
Damage to vehicles. Commercial auto covers vehicle damage; equipment breakdown excludes vehicles.
Faulty workmanship or improper installation. If equipment was installed incorrectly and fails as a result, coverage typically does not apply.
Damage from intentional acts. Standard exclusion across all property forms.

Cost of equipment breakdown insurance

For full cost analysis with industry breakdowns, top carriers by published starting price, and 2026 benchmark data, see our equipment breakdown insurance cost guide.

Equipment breakdown is typically inexpensive relative to the coverage it provides. Most carriers offer it as either a low-cost endorsement to a BOP or commercial property policy, or as a standalone policy:⁴

As a BOP endorsement: typically $5 to $30/month additional premium for limits up to $50,000 to $150,000.
As a standalone policy: typically $20 to $250/month for limits up to $500,000 to $1M, depending on equipment values, industry, and exposure.
For higher-exposure operations (manufacturing, large food service, healthcare with imaging equipment): $250 to $1,000+/month for higher limits and specialized coverage.

For full cost methodology, see our 2026 small business insurance cost guide.

The variables underwriters use:

Total insured equipment value — the largest single driver.
Industry and operations type — manufacturing and food service price higher than office-based.
Equipment age and maintenance history — newer, well-maintained equipment prices lower.
Inspection requirements — boilers and pressure vessels typically require periodic inspections as a condition of coverage.

How equipment breakdown interacts with other coverages

Commercial property covers external damage to equipment (fire, theft, weather). Equipment breakdown covers internal failure (mechanical, electrical, pressure). The two are complementary; both are typically needed for adequate equipment protection.
Inland marine covers off-premises equipment exposure (theft, accidental damage in transit). Equipment breakdown covers on-premises mechanical failure. Different exposures, different coverages.
Manufacturer warranties. Most equipment carries 1 to 3 year warranty coverage from the manufacturer. Equipment breakdown insurance picks up exposure beyond the warranty period and covers consequential damages (spoilage, business income loss) that warranties typically do not.
Business interruption covers income loss from physical damage. Equipment breakdown often includes its own business income coverage specific to equipment-related downtime.

State requirements

Equipment breakdown is not legally required by any state. Functional requirements come from:

Equipment financing covenants. Most equipment loans require coverage on financed equipment.
Lease agreements. Many commercial leases require tenants to carry equipment breakdown on building systems they are responsible for maintaining.
Boiler inspection laws. Several states require periodic inspection of pressure vessels and boilers, which carriers typically administer as part of equipment breakdown coverage.

Frequently asked questions

Is equipment breakdown the same as boiler and machinery insurance?

Yes — "boiler and machinery" is the older industry name; "equipment breakdown" is the modern term. Most policies cover both traditional boiler/pressure vessel exposures and modern electronic and mechanical equipment under the same form.

Will my BOP cover a refrigerator failure?

A standard BOP covers fire, theft, weather, and similar external events damaging your refrigerator. It does not cover mechanical breakdown of the refrigerator itself or spoilage of contents from a refrigerator that fails. Equipment breakdown coverage is required for those scenarios.

Does my warranty replace the need for equipment breakdown insurance?

For new equipment within the warranty period, the manufacturer warranty covers some exposures. But warranties typically (a) expire after 1 to 3 years, (b) do not cover consequential damages like spoilage or business income loss, (c) often do not cover labor or expediting costs, and (d) require specific maintenance documentation to remain valid. Equipment breakdown covers exposures warranties do not.

Is equipment breakdown coverage worth it for a small office?

For an office with $5,000 to $10,000 in equipment, probably not. The premium-to-coverage ratio favors larger exposures. For offices with significant computer/server infrastructure, specialized equipment, or HVAC-dependent operations, even a small office can benefit. Run the numbers: if a single equipment failure could cost more than a year of premiums, the coverage is worth carrying.

Is equipment breakdown insurance tax deductible?

Yes. Premiums for ordinary and necessary commercial insurance are deductible business expenses under IRS rules. Verify with a CPA for your specific situation.

Footnotes

Insurance Information Institute — Equipment Breakdown Insurance. https://www.iii.org/article/equipment-breakdown-insurance ↩
International Risk Management Institute (IRMI) — Equipment Breakdown Insurance. https://www.irmi.com/term/insurance-definitions/equipment-breakdown-insurance ↩ ↩²
The Hartford — Equipment Breakdown Coverage. https://www.thehartford.com/business-insurance/equipment-breakdown-insurance ↩
Insureon — Equipment Breakdown Insurance Cost. https://www.insureon.com/small-business-insurance/equipment-breakdown ↩

Find your match

See which carriers fit your business.

Tell us about your business. We'll rank the carriers in our coverage set by industry fit, state availability, and your selected coverages.

Find your matches

Top carriers

Compare top equipment breakdown insurance carriers

Recommended carriers for this coverage, ranked against our 6-dimension methodology.

Sub-threshold = fewer than 20 NAIC complaints in 3 years (data is too sparse to score reliably). N/A (broker) = not a carrier. See full methodology →

Our score	Positioning	Starting price	Coverage	Claims	AM Best	NAIC index	States	Quote channel
8.1	Broad-ladder primary carrier	GL $42/mo	9.0/10	8.0/10	A++	Sub-threshold	50 states	Direct online
7.9	Single-carrier program for SMBs	GL $68/mo	9.0/10	8.0/10	A+	Sub-threshold	50 states	Direct online
7.0	Professional services E&O focus	GL $30/mo	7.5/10	8.0/10	A	8.15	50 states	Direct online
8.1	Broker comparing 8+ carriers	GL $21/mo	8.5/10	7.5/10	—	N/A (broker)	50 states	Broker portal

About complaint index data: Values are 3-year averages from NAIC Consumer Information Source for commercial liability. Carriers with fewer than 20 complaints in the 3-year window are labeled "sub-threshold". A reliability call about data volume, not a finding about the carrier. Brokers (Category D) are structurally N/A. See our complete methodology.

Full per-carrier analysis lives in each carrier review. See our scoring methodology for how we weight the dimensions above.

Find your match

See which carriers fit your business.

Tell us about your business. We'll rank the carriers in our coverage set by industry fit, state availability, and your selected coverages.

Find your matches