Home systems and technology continue to advance, but many essential appliances and mechanical systems can still fail without warning. While they keep properties comfortable and running smoothly, internal breakdowns are often not covered by standard property insurance policies. 

 If it uses electric power, it is most likely subject to equipment breakdown, and often this equipment requires sophisticated diagnostic tools and skilled technicians to oversee potential repair or replacement. NREIG’s Equipment Breakdown coverage protects you against unexpected repair or replacement costs due to an electrical, mechanical, or pressure systems breakdown.  

Coverages Provided by Equipment Breakdown 

Equipment Breakdown covers mechanical, electrical, and pressure system breakdowns. The following exposures may exist at your property and are included under this coverage:  

  • Electric appliances 
  • Distribution panels, circuit breakers, cables/wiring 
  • Transformers and emergency generators   
  • Heat pumps, heating and central A/C systems, boilers, and water heaters 
  • Solar panels/inverters  
  • Sump pumps

Coverages offered under Equipment Breakdown include, but are not limited to: 

  • Property Damage 
  • Off-Premises Property Damage  
  • Business Income 
  • Extra Expense 
  • Environmental, Safety, and Efficiency Improvements  

Please be advised:  

Equipment Breakdown is not a maintenance policy or home warranty. Equipment not performing due to age, wear and tear, corrosion, or deterioration that did not experience or result in an equipment breakdown is not covered by this product.  

Equipment Breakdown can be purchased as a standalone policy but provides the most benefit in conjunction with a property policy, as Equipment Breakdown covers damaged or broken equipment, and any resulting damage to the property would fall under the property policies domain.  

For example, an arcing incident in the living room caused a house fire. Your Equipment Breakdown policy would apply to the repair or replacement of the electrical equipment. Your property policy would apply for fire damage to the home.  

Frequently Asked Questions 

Q: What does Equipment Breakdown cover? 

A: Equipment Breakdown covers the breakdown of mechanical, electrical, and pressure systems. 

Q: What are some examples of covered property? 

A: Examples of covered property include items in a home that can break down mechanically or electrically. For example, heat pumps, swimming pool equipment, air conditioning systems, electrical panels, and other household appliances.  

Q: What are the benefits of adding Equipment Breakdown coverage to my property policy? 

A: In most real estate investment property policies, there are specific exclusions for mechanical and pressure system breakdowns, and coverage for electrical breakdowns is limited. By adding this ancillary product, your coverage extends to losses caused by, resulting from, or consisting of an electrical, mechanical, or pressure system breakdown.  

Q: Can damaged equipment be replaced with more efficient equipment? 

A: Yes, Equipment Breakdown coverage may pay up to 150% for replacement of equipment that is more efficient and better for the environment. 

Q: What is the difference between wear and tear and mechanical breakdown? 

A: A mechanical breakdown occurs suddenly and unexpectedly. Wear and tear occurs over time when performance of the equipment slowly declines, and its capacity diminishes; however, the equipment continues to operate but does not perform as expected. In instances like these where wear and tear is excluded from the property policy and no breakdown has occurred; Equipment Breakdown would not provide coverage.  

Examples of potential losses

Equipment Breakdown may cover damage caused by power surge, equipment overheating, improper ventilation, and more. Below are some common Equipment Breakdown losses that may be covered. 

  • Electrical arcing destroyed three main electrical panels and left the building without power. Temporary measures had to be taken to restore power to tenants.  
    • Costs to obtain and run backup generators may be covered as well as equipment repair/replacement costs. 
    • Estimated Property Damage: $165,000 
    • Estimated Extra Expense: $110,000 
  • An apartment complex’s electrical supply burned out and severely damaged electrical wires and cables. Affected tenants had to be relocated as a result.  
    • Equipment Breakdown may cover the equipment repair/replacement cost and the relocation costs.  
    • Estimated Property Damage: $82,000 
    • Estimated Extra Expense: $17,000 
  • The compressor motor in a building’s air conditioner overheated and seized. Temperatures exceeding 90 degrees required four spot coolers to be rented and set up in tenants’ apartments. Overtime pay for maintenance staff was required to replace the motor.  
    • Equipment Breakdown may cover the rental cost of the spot coolers, overtime paid to staff, and equipment repair costs. 
    • Estimated Property Damage: $23,000 
    • Estimated Extra Expense: $8,000 
  • A power surge damaged multiple electronics in a rental home, including the computer system, telephone system, hardwired smoke detectors, and security system.  
    • Equipment Breakdown may cover the cost of restoring these systems back to an operational state.  
    • Estimated Property Damage: $31,000 
    • Estimated Rental Income: $6,000 
  • Sediment in a boiler caused a low water condition that triggered severe over–firing and resulted in the boiler shutting down. A rental unit was necessary until the damaged boiler could be replaced.  
    • Equipment Breakdown may cover the cost of the replacement boiler and the cost of the required rental unit.  
    • Estimated Property Damage: $43,000 
    • Estimated Extra Expense: $12,000 
  • A section of a boiler and a steam pipe fitting cracked and had to be replaced. 
    • Equipment Breakdown may cover the cost of replacement parts and required labor.  
    • Estimated Property Damage: $26,000 

Equipment Breakdown is available as a standalone option or as an add-on to your existing policy and can be added at any time by endorsement. Contact your Client Service Advisor if you have questions. 

*Equipment Breakdown coverage is NOT a home warranty and does NOT extend to wear and tear or deferred maintenance.* 

*Equipment Breakdown coverage is not available for new construction locations.*