What does machinery breakdown insurance cover?
Sudden breakdown of machinery at your premises, the cost of repairing or replacing it, and damage the breakdown causes to other property. The wordings we read exclude wear and tear, vehicles, and breakdowns during installation.
- Source
- Business insurance PDSs from two Australian insurers (machinery breakdown sections)
- Updated
Machinery Breakdown Insurance — What It Covers
Machinery breakdown insurance covers the sudden failure of mechanical and electrical machinery at your premises, including repair or replacement and damage to other property. The wordings we read separate individually listed machinery from blanket cover for everything else, and add benefits such as extra costs and debris removal.
Core Cover
▹ Breakdown of machinery at your premises during the period of insurance
▹ Direct damage to other property caused by the breakdown
▹ Repairing or replacing the machinery, at the insurer's option
If you repair it yourself, one wording pays materials, wages and a reasonable overhead, as long as a qualified person does the work and the insurer approves it first. Source: business insurance PDSs, machinery breakdown sections.
What Counts as Machinery
The wordings include electrical and mechanical machinery, boilers and pressure vessels (including refrigeration and air conditioning vessels and piping), and pressure pipe systems.
▹ Specified machinery: items listed individually on your schedule, each with its own sum insured.
▹ Blanket machinery: all other qualifying machinery at the premises, up to one overall limit.
Source: business insurance PDSs, machinery breakdown definitions.
What Counts as a Breakdown
▹ One wording: the actual breaking, seizing, deformation or melting of a part while the machine is in use, from a mechanical, electrical or electronic defect, so that it must be repaired or replaced before it can run normally.
▹ Another wording: a sudden and accidental failure causing physical damage that needs repair or replacement, not including deterioration, corrosion, wear and tear, vibration, misalignment, safety devices operating, or failure of a supporting structure.
Source: business insurance PDSs, machinery breakdown definitions.
Additional Benefits
▹ Extra costs (one wording): dismantling and re-erecting, cleaning up, replacing lost refrigerant or oil, public holiday overtime, freight including overseas air freight and labour, temporary repairs or hire of a replacement, and customs duties. Overtime, freight and temporary replacement together are limited to 50% of the normal repair cost, on top of the sum insured.
▹ Consulting engineers' fees (one wording): an extra $5,000 once the sum insured is used up.
▹ Inflation protection (one wording): the sum insured rises with CPI over the year.
▹ New machinery (one wording): similar machinery you buy or hire is added automatically.
▹ Debris removal (one wording): up to $25,000 per event, on top of the sum insured.
Source: business insurance PDSs, machinery breakdown sections.
Optional Deterioration of Stock
One wording offers optional cover for perishable stock that spoils when a fridge or freezer changes temperature because of a covered breakdown, faulty thermostats or controls, refrigerant leaks, or a sudden failure of the public power supply. It also covers reasonable costs to reduce the loss. Source: business insurance PDS, deterioration of stock section.
Exclusions
▹ Vehicles, mobile equipment, watercraft and aircraft
▹ Lifts and escalators
▹ In one wording, computers, communications and audio-visual equipment, alarms, lighting, office machines, storage tanks and portable hand tools
▹ Breakdown during installation, erection or relocation
▹ Testing, abnormal stresses or deliberate overloading
▹ Deliberate acts or neglect
▹ Alterations, improvements or overhauls
▹ Machinery that is obsolete or no longer used
▹ Pollution or contamination
▹ Damage to foundations or brickwork, except as a result of a breakdown
Source: business insurance PDSs, machinery breakdown exclusions.
Important Notes
Limits, sub-limits and excesses differ between insurers and between retail and broker-arranged policies. Check the PDS and schedule for your own policy, or ask your broker.
Factual information from the policy wordings cited above, at the date above. It is not personal advice, financial product advice or a recommendation, and cover depends on your policy, schedule and circumstances. PolicyAI can make mistakes: check the current Product Disclosure Statement (PDS) or ask your broker before relying on it. Spotted an error? Tell us. See our disclaimer.
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