Do You Need Equipment Breakdown Insurance?

As a savvy business owner, there’s no doubt that you’ve looked into basic commercial insurance coverage and its cost. So you may recognize the two most common business insurance policies: general liability and property damage.

Depending on the type of business you own, there’s one important thing you may have missed in reviewing the options available. That is, unless your electrical and/or mechanical equipment is damaged by one of the general perils specifically listed on your property damage policy, you won’t be covered if you have to replace or repair it.

A few examples of commonly covered perils are events such as fire, wind, hail, smoke, and civil unrest. However, the average policy usually doesn’t include any coverage for mechanical breakdown. And not having the proper endorsement to properly protect your equipment could shut down your business for days or weeks, during which time your income and profits could all but cease.

Who needs it?

If the extent of your business’s equipment is a small cash register and a phone, and/or if you rent a space where the owner provides maintenance, heat, and air, you may find that you’re not going to need mechanical breakdown coverage as an essential part of your commercial insurance coverage, providing, of course, you have saved up the money towards replacing or repairing your cash register and phone in the event of a non-covered loss.

Those business owners who should be especially concerned about equipment breakdown coverage are companies that have any or all of the following: manufacturing equipment; more than one computer; refrigeration; boiler systems; cooking equipment; generators; motors; fire and security systems.

Equipment breakdown coverage is important whether you own or lease the equipment. To protect themselves, leasing companies will often require you to carry this protection, not unlike an auto lender that insists you carry comprehensive and collision coverage on your auto insurance policy when you’re financing a car.

What’s covered?

This policy will cover labor and other costs of repairing equipment, not just replacing it. There are other residual losses that may occur due to the breakdown that are also covered. For example, if you own a restaurant and your freezer breaks, causing you to lose thousands of dollars’ worth of frozen food, that would be covered.

Clean-up services may also be covered if the breakdown causes a mess. One of its greatest benefits is that it will also cover any loss of business you experience while getting the equipment repaired or replaced.

Some insurance companies will offer equipment breakdown as a separate policy, or it can be added as an endorsement – a special addition – to your existing commercial insurance policy.

Ask your insurance professional if there are differences in the coverage limits and options, so you can make a well-informed decision about which option would be better for you.

Prepare and protect the flow of your business to ensure minimal interruption if something or, as sometimes happens, everything breaks down. Your business account (and your personal checking account) will thank you.

Common FAQs About Commercial Insurance

Running your own business can be challenging, and you likely have many questions about all aspects of it, including commercial insurance. Here are some common FAQs about commercial insurance:

What is professional liability insurance?

This coverage provides liability protection for claims made against your services or products, such as failing to perform work or causing losses as a result of mistakes in these services or products.

Are employees’ personal autos covered under commercial auto insurance policies when they use their cars for business?

Usually a company’s commercial auto insurance includes an endorsement that covers employees using their private vehicles for business. However, the employee’s personal policy would still be the primary insurer and would pay for any damage to an employee’s auto, even when it’s used for business purposes. The endorsement would apply only after the personal coverage is used up.

When should you buy workers compensation insurance?

Most state laws require businesses to carry workers compensation if there’s more than one employee. This varies from state to state, so ask your insurance agent.

What coverage is needed for home-based businesses?

Homeowners insurance usually doesn’t cover home-based business losses. Sometimes commercial insurance can be added onto homeowners insurance, but coverage may be insufficient. Consider a business-owners policy, which covers liability for yourself, employees, buildings, and more.

Do You Have Enough Auto Liability Coverage?

When buying auto insurance, you may be tempted to opt for the liability limits your state legally requires you to carry, and pay lower premiums. However, this can be a dangerous decision.

If you’re at fault for an accident, the liability portion of your policy would pay for two things:

  • Bodily injury liability would pay for another person’s medical expenses.
  • Property damage liability would pay for damage you cause to another person’s property.

If damages and medical expenses exceed the policy’s limits, you’re responsible for them out-of-pocket. If you can’t pay out-of-pocket, you could be sued, and if found liable by courts, your assets could be seized or wages garnisheed.

According to the AAA, the average auto accident costs roughly $26,000. In some states, required liability limits would barely begin to cover the costs of repairing or replacing vehicles, other property damage, or medical expenses.

For example, Ohio only requires $12,500 in bodily injury coverage and $7,500 in property damage protection. If you plow into a Porsche with two people inside who require emergency medical care, you could end up paying hundreds of thousands of dollars from your own pocket because of insufficient coverage.

Carry at least $50,000/$100,000 in bodily injury liability (limit per person/limit per accident respectively), and $25,000 in property damage. If that’s too costly, carry $25,000/$25,000 plus $25,000 for six months to a year, and step it up the following year. You’re unlikely to see skyrocketing rates, because you’re establishing “financial responsibility” as a policyholder, meaning cheaper rates in the long run – another reason minimum coverage isn’t really the cheapest.

Carrying state minimum liability simply means you’re legal to be on the road – it doesn’t mean you have sufficient protection. Talk with your insurance agent to find a coverage you feel adequately protects you. Then be confident that your financial future is secure – at least insurance-wise.

Three Insurance Mistakes You REALLY Don’t Want to Make

Sometimes we make mistakes because we don’t know and don’t ask. This is often the case with insurance, so here are three important general insurance mistakes to avoid:

Not carrying the right policy: Just because you can buy a certain type of policy doesn’t mean it’s the best fit for what you want to insure, even if it is cheaper. For example, standard auto insurance is cheaper than collector car insurance, so many people insure their valuable collector cars with standard auto insurance, just as they would any other car. In fact, collector cars should be insured on an agreed-value or stated-value basis. They present different risks than other cars, so a standard policy may be insufficient or not even cover a claim. Discuss what you want to insure and the kind of protection you want with your insurance agent.

Failing to read your policy: Insurance policies can be a bit long-winded, but read them to understand what protection you have – or don’t have. Failing to do this can be devastating. For example, a large number of homeowners whose homes were completely destroyed in Hurricane Katrina learned – after the storm – that homeowners insurance doesn’t cover flood damage.

Leaving coverage gaps: Learn exactly how your policy works. Take homeowners insurance, for example. There’s quite a gap between insuring your home at replacement cost versus its market or appraised values. If you know how the policy works, you won’t be left with a gap, nor will you pay for more insurance than you need.

The Benefits of Critical Injury and High Risk Insurance

If you suddenly become seriously ill, you’ll have many concerns; the biggest one may be: “How will I pay for everything?”

Even with health insurance, some expenses won’t be covered. However, there’s a solution: supplemental high-risk and critical injury insurance, a supplementary policy to your health insurance that provides cash benefits to you if you develop a serious illness. Supplementary coverage would kick in after your health insurance is exhausted. Considering healthcare costs, that’s not difficult to do, and it’s easier than you might think to be bankrupted by health care costs.

Whether you need it is based upon what you want to be prepared for and what assets to protect, such as home or investment products. Not only can it help cover medical expenses and care, it can also help cover your mortgage and other bills if you become ill and are suddenly faced with loss of income from serious illnesses such as

  • Cancer
  • Stroke
  • Cardiovascular disease
  • Blindness

Other illnesses or injuries may be covered, too, such as major burns, so read your policy carefully, as not all cover the exact same things. Additionally, a covered illness could still have limitations. For example, some policies only cover HIV if it was contracted through an organ transplant or blood transfusion. Other limits could include things such as policy payout limits or diagnostic expenses. If you don’t get sick often and you have savings it may be good for your peace of mind.

Preventive Health Care Can Save Your Life

Because preventive healthcare is vital in preventing or stopping illnesses and diseases, you should be aware of preventive services available under the ACA. These are available regardless of whether annual deductibles are met or not; and most plans, including Marketplace (and, in the case of children, Medicaid), must provide them without charging a co-payment, contingent on the services being delivered by a network provider.

The information below just touches on the many preventive services available. For additional information, go to US Government’s Healthcare website  or check your specific health care plan.

Preventive services for adults include

  • prescribed aspirin regimens to prevent heart disease;
  • cholesterol screening for those of a certain age or at high-risk;
  • type 2 diabetes screening for individuals with high blood pressure.

Preventive health services for women:

Some preventive services include:

  • anemia screening for pregnant women;
  • osteoporosis screening for women over age 60 (providing they have risk factors);
  • mammography screening for women over 40

Preventive health services for children: These include services that range from autism screening for children at 18 and 24 months, to hearing screening for all newborns and vision screening for all children.

The list of preventive services available to children also includes immunization from birth to age 18, but ensure you check for additional details as well as a complete list of all the immunization vaccines.

According to a report from the U.S. Centers for Disease Control and Prevention: “Chronic diseases, such as heart disease, cancer, and diabetes, are responsible for 7 of every 10 deaths among Americans each year. The right preventive care at every stage of life helps all Americans stay healthy, avoid or delay the onset of disease, keep diseases they already have from becoming worse or debilitating, and reduce costs.”

Understanding Cash Value Life Insurance

Cash-value life insurance policies offer a withdrawal feature along with a death benefit, but they can get complicated, so you have to know what you need it for before you buy one.

Peace of mind

How does it work? Cash-value life insurance policies accumulate funds that you can tap at certain times through withdrawals or loans. Then later, when enough cash value has been built up, you can also use it to pay your premiums. Any money you withdraw simply reduces your death benefit.

Cash-value life insurance achieves a number of things, including the peace of mind that comes from knowing you have an option if you need cash.

However, there are some things to consider when investing in such a policy:

Know what you want

The biggest consideration is what it is you actually want the policy for. If all you need is life insurance – and not the unique features of a cash-value policy – it’s probably not a good idea to buy it, as cash-value life insurance policies are usually considerably more expensive.

Additionally, it’s important to understand that cash-value life insurance policies should not be used as savings vehicles, because you are taxed on the money you contribute (although the death benefit is generally tax-free to survivors).

Finally, keep in mind that the cash value doesn’t start to accumulate immediately, because commissions are often subtracted in the early years (and there are often annual fees as well).

Although there are these downsides, a cash-value life insurance policy may be just exactly what you need.

However, it’s important to discuss this kind of a policy with your advisor. An insurance professional can answer any questions you may have, show you all the options available, and help you decide whether cash-value life insurance is suitable for you based on your goals and risk tolerance.