Know Risk is a community education program designed by the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) to improve our understanding of insurance and how it relates to managing the many risks we all face in life.
Electronic equipment insurance for small businesses — the basics
Learn how how to insure yourself against electronic equipment failure
Have you considered what you would do if your business’s computer systems and other electronic equipment were damaged or broke down? How would this affect your business? Would you be able to continue to operate or would your business be interrupted to some degree? What effect would this have on your profits?
Electronic equipment insurance is designed to help combat these issues — usually through money to reinstate or repair the damaged or broken-down, equipment and to hire replacement equipment in the meantime — and help keep your business running, or at least get it back up and running as soon as possible.
Let’s have a look at the basics of this type of insurance to help you make a more informed decision about whether or not it’s an insurance type relevant to you and your business.
Bear in mind, however, that while we’ve tried to give you an overview of a “typical” policy for this type of insurance, the type and nature of coverage varies widely among insurers.
What classifies as “electronic equipment”?
“Electronic equipment” is obviously a very broad term, and while its definition will vary from policy to policy, the kinds of things that are usually covered include the following:
- Electrical machinery
- Mechanical machinery
- Computer systems
- Interconnecting cabling and piping
- Air conditioning systems
- Equipment that is connected to and operates from a computer
- Boilers and pressure vessels
The types of things that usually do not fall under the definition of “electronic equipment” include:
- Motor vehicles
- Portable electronic equipment
- Portable hand-held tools
- Items that are typically used domestically (e.g. a blender, vacuum, etc.)
- Vending machines
- Liquid and gas piping
- Hand dryers
What sorts of situations are typically excluded?
While electronic equipment insurance is designed to provide coverage for the damage or breakdown of equipment, there are some circumstances in which most policies will not pay out.
Such circumstances include:
- Defects or design faults of which you were aware
- General wear and tear
- Cosmetic damage
- Theft that has not occurred as a result of violent and forcible entry of a securely locked premises or other item containing the insured equipment
- Intentional destruction or damage
- Malicious or accidental erasure of data
- Damage or loss as a result of war or radioactivity
Is electronic equipment insurance a stand-alone policy?
Yes, some insurers offer electronic equipment insurance as a stand-alone policy. Others, however, offer it as part of a business pack policy. Some may have both options on offer. The great news is that regardless of whether it’s purchased as a stand-alone policy or as part of a business pack, it can usually be tailored to the needs of your business.
What should I be wary of with this type of insurance?
Something to consider is the following list of things that are not usually automatically included in a policy, but may be added as extras:
- Restoration of data
- Portable electronic equipment
- Increased working costs
- Deterioration of stock
Just for fun, each of these optional extras usually comes with its own set of exclusions.
If you are considering electronic equipment insurance for your business, make sure you have a solid understanding of the types of equipment and situations you are seeking coverage for and be certain any potential policy actually offers coverage for what you need — and if the coverage you need comes in the form of an extra, make sure you add it to your policy!
How do I know if it’s an insurance worth considering?
As with all types of insurance related to your business, it’s ideal that you discuss your business’s particular needs with a trusted business adviser or an insurance broker who is unaffiliated with a particular insurance company.
These types of professionals will be able to ask you some specific questions about your business in order to make an informed assessment and recommendation of where the risks to your business lie and which insurance options are required to combat those risks.