Equipment Breakdown Coverage – Homeowners Policy Endorsement

Homeowners policies come with a variety of endorsements, packages, and bundles – each with their own unique or clever name. It’s important to understand what endorsement or coverage is included in your homeowners policy. While there are a variety of very important endorsements that you should consider adding to your homeowners policy, we are going to be discussing one today: Equipment Breakdown Coverage.

Those who are familiar with commercial policies may be more familiar with equipment breakdown coverage (especially if that business has a boiler or a similar piece of equipment). Most individuals are not aware that many (but not all) insurance carriers offer a similar endorsement for their personal policies. It is often quite inexpensive and covers a variety of equipment for causes that would not be covered otherwise.

Let’s start by defining what the coverage is: coverage for mechanical breakdown, electrical breakdown and power surge to all real and personal property. Usually the policy deductible would apply to all covered losses and some companies place a maximum limit that would be paid out for any one occurrence. It’s also important to ask if there is any waiting period for coverage to be effective if the endorsement is added mid-term.

Coverage is generally provided for all electrical and mechanical equipment such as furnaces, air conditioners, water heaters, dishwashers, refrigerators, washers, dryers, computers, televisions, etc. While these items are covered under your personal property coverage on your home policy – it is the cause of loss where this endorsement creates value. The cause of loss is unique to this endorsement (and parts of it would be covered under special personal property coverage (see next blog post for more info)).

An important note: although mechanical breakdown carries a broad definition in most insurance policy forms – many times there are important exclusions to this coverage. For example, a policy form may exclude coverage for normal wear and tear or breakdown due to negligence.

As always, please ask your insurance professional any additional questions you may have regarding this topic. We feel as though there is value in this endorsement – if the company you are with offers this coverage. Please read policy forms for exact coverage.

Insurance is a cost of living (and doing business) – Period.

As insurance agents, brokers, advisers, risk managers – whatever you want to call us – we hear it all.  The majority of the time it is negative statements regarding insurance – mostly about premiums, bills, audits, etc.  We always hear from an individual or business owner that one of their friends told them how to save a fortune on their insurance or how to scam the system (see “recording employees as subcontractors”).  You hardly ever hear from one of your friends how insurance saved their lives – literally or financially – or how it rebuilt their home after a Hurricane Katrina or Sandy. Yet, the never ending search for people trying to get ‘something for nothing’ continues.  Frankly, it’s a shame.thCAYTMVMJ

Why does everyone want to save a fortune on their insurance premiums yet they are willing to go buy the latest technological gadget?  They want the social status of having ‘the best’ but are unwilling to pay for the best protection.  Individuals or businesses that pay the extra money for more insurance coverage should be applauded and advertised.   They should be proud that they have the best protection money can buy.  Instead – everyone wants less – less coverage, lower premiums, less headaches and so forth.  The best way to put your family in a position with less risk is to pay for better protection.

I like to use the example of people who pay to heat their homes (for those unaware, we live in WI and therefore, this is mandatory).  What temperature do you keep your thermostat at during the winter months?  I would guess that the average is somewhere between 65 and 70.  Why?  That is where we are most comfortable – not too hot and not too cold.  It also avoids us having to pay for problems that may arise – like illness or freezing pipes.  Why not keep the thermostat at 45 or 50 degrees?  The human body would be able to survive, but your life would be extremely uncomfortable and probably miserable.  We are willing to pay for that comfort – with very few complaints and very few questions asked.  We correlate paying for heating as a cost of living in Wisconsin.

Why don’t we correlate paying for insurance and protection as a cost of living (or doing business)?  My guess is that it is the perception that insurance is a scam, not worth the money, and that insurance companies make billions of dollars.  Some of this is true and most of it is false, but people need to realize the billions of dollars the private insurance industry pays out on a yearly basis to restore individual lives.  Every individual certainly has every right to under insure or not purchase insurance at all (except for auto liability insurance in the state of WI).  However, don’t expect any sympathy from your insurance advisor when an accident does occur and you don’t have proper coverage.  Would you have sympathy for someone who turned their heat down to 30 degrees and then complained about frozen pipes?  I didn’t think so.

As always, talk to an insurance professional when determining what coverage is appropriate for you.  If you are paying for the best coverage you can afford – good for you.  If you are on the other end of the spectrum, consider all possible outcomes and determine what you believe is in your best interest.