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.
Machinery breakdown insurance for small businesses
Cover to keep your motors running
If you own your own business and the operation of that business is heavily reliant on machinery and equipment, it might be worth considering having a machinery breakdown insurance policy in place.
Sometimes called engineering plant insurance, a machinery breakdown policy can help limit the impact to profit and ensure your business continues to run efficiently in the event that any fixed machinery, pressure vessels or boilers integral to your business happen to break down.
Machinery breakdown insurance is designed to help protect your business financially by covering the cost of repairs to broken-down machinery, as well as any consequential losses as a result of that breakdown.
What types of machinery are usually covered?
The types of machinery that such policies are usually designed to cover include, but are not limited to, the following:
- Pressure vessels
- Air conditioning units
- Printing equipment
- Industrial fridges, freezers and cool rooms
What types of scenarios are covered?
While the nature of each policy and its inclusions will vary between insurers, some of the most common coverage items (meaning they can typically be covered, and not that they are typically automatically included) are listed below.
- Equipment breakdown — this covers the cost to replace or repair items in the event they break down
- Interruption — this covers any loss of profits as a result of the broken-down machinery
- Temporary hire — this covers the cost of hiring equipment to keep your business running while repairs to your machinery are carried out
- Deterioration of stock — this covers the cost of spoilt or expired stock after a breakdown
- Expediting costs — this will cover any expenses associated with speeding up the process of repair or replacement
- Professional fees — this will cover the cost of hiring professionals to help quantify or prove a specific loss
What industries is this type of insurance most relevant to?
While it may seem like machinery breakdown insurance is limited in relevance to larger-scale industrial business operations, it can actually serve a purpose in multiple business types.
Below is a list of some types of businesses that may be reliant on machinery in some capacity:
- Vehicle repair shops
- Printing facilities
- Food and drink production plants
- Any business that has an office building
- Any business with cold storage
- Laundries and dry cleaners
- Wood or metal workers
- Medical suppliers
- Saw mills
Do I need it?
As always, the best way to determine what is most appropriate for you and your business is to speak with a trusted business or insurance adviser. If you’re going with the latter, make sure you speak to someone who isn’t affiliated with a particular insurance company.
While it may not seem on the surface that machinery breakdown insurance is relevant to your small business, it may be worth speaking to someone in the know just to be sure your instincts are correct. These types of professionals will be able to assess the specifics of your business and situation and then make an informed recommendation about what insurance policy is best for you.
They may also be able to make recommendations on which insurance company is best suited to your needs. For example, some insurers specialise in policies designed for specific industries and trades.
Don’t be afraid to ask lots of questions — having clarity on the ins and outs of insurance related to your business will only enhance your ability to make the kinds of decisions that can help make your business a success.