Texas General Lines — Property and CasualtyCommercial LinesEasy
A small manufacturing company uses several specialized machines that are critical to its production line. They are concerned about financial losses due to unexpected breakdowns of these machines from causes like mechanical failure, short circuits, or operator error. What type of commercial insurance would cover these specific risks?
- AInland Marine (Contractors Equipment Floater)
- BEquipment Breakdown Insurance
- CCommercial Property (Building and Personal Property Coverage Form)
- DBusiness Income and Extra Expense
Show answer & explanationAnswer & explanation
Correct answer: B. Equipment Breakdown Insurance
Equipment Breakdown Insurance (formerly Boiler and Machinery) is designed to cover direct physical damage to covered equipment caused by mechanical breakdown, electrical arcing, or other specified perils, as well as resulting business income losses.
Why the other options are wrong
- A. A Contractors Equipment Floater covers mobile equipment used by contractors, not stationary production machinery within a factory.
- C. Standard commercial property policies often exclude perils like mechanical breakdown, short circuits, or boiler explosions, requiring specialized coverage.
- D. While Business Income can be covered by an Equipment Breakdown policy, it's a consequence of the breakdown, not the primary coverage for the breakdown itself.
Equipment Breakdown Insurance
Insurance that covers losses due to the sudden and accidental breakdown of mechanical, electrical, or pressure equipment, including direct damage, business interruption, and extra expense.
- Covers internal breakdown of equipment
- Includes mechanical, electrical, pressure failures
- Covers direct damage and related business interruption
Memory trick: Equipment Breakdown: When machines go kaput, this is your safety net.