Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Property InsuranceEasy
A client has a Commercial Property Policy covering their office building. A severe thunderstorm causes a power surge that damages the building's main electrical panel and the central air conditioning unit. Which of the following coverages would typically respond to these damages?
- ABusiness Income Coverage
- BExtra Expense Coverage
- COrdinance or Law Coverage
- DEquipment Breakdown Coverage
Show answer & explanationAnswer & explanation
Correct answer: D. Equipment Breakdown Coverage
Damage to electrical panels and air conditioning units due to a power surge falls under Equipment Breakdown Coverage. This coverage specifically addresses losses from mechanical or electrical breakdown.
Why the other options are wrong
- A. Business Income Coverage covers loss of income due to property damage, not the damage itself.
- B. Extra Expense Coverage covers additional costs incurred to minimize business interruption, not the damage to equipment.
- C. Ordinance or Law Coverage covers increased costs due to building code compliance after a loss, not the initial damage.
Equipment Breakdown Coverage
Insurance that covers direct physical damage to covered equipment from perils such as mechanical breakdown, electrical arcing, artificially generated current, or boiler explosions.
- Covers mechanical or electrical breakdown.
- Often added by endorsement or as a separate policy.
- Includes items like boilers, machinery, electrical systems, and air conditioning.
Memory trick: Electrical surges need special breakdown care.