You may or may not have a boiler, but chances are you need boiler and machinery (B&M) insurance. Why? Because your business property insurance covers a wide range of perils, such as fire, flood and accident, but it doesn't pay for equipment failure and any resulting losses.
Equipment and mechanical breakdowns have always been excluded by commercial property policies since back in the first half of the 20th century when steam boiler explosions were likely, explains Madelyn Flannagan of the Independent Insurance Agents of America. But after eliminating these risks from standard property policies, Flannagan says, the industry created a separate product to address them.
Because equipment has become so much more complex, B&M coverage is often referred to as "equipment breakdown" or "machinery and equipment insurance" today, and it includes a wide range of devices, including electrical systems, production equipment and air-conditioning and heating systems. "Even modern office equipment can be production machinery," notes Flannagan. Most policies cover the cost of repair or replacement of equipment that breaks down suddenly and accidentally. They may also cover loss of income from property damage liability defense costs as well as consequential damages, such as damage to other real or personal property, due to the breakdown. For example, if you have a restaurant or grocery store and one of your refrigeration units breaks down, B&M will pay to repair the unit and replace the spoiled food. Or if your air conditioner breaks down and equipment is damaged because of excessive heat, B&M will take care of both the air conditioner as well as the other equipment.
Flannagan says B&M is available from most carriers as an add-on to commercial property policies, and agents frequently recommend it. Don't let the name fool you into thinking you don't need it; it's a rare business that does not have exposure in this area, she says. If you own your building, you at least need B&M for your air-conditioning and heating system-and if you rent, your landlord may cover the building systems, but you still need to be responsible for your equipment.
When you're shopping for a B&M policy, Flannagan advises choosing one that includes loss of income; will cover maintaining your operation after a loss, especially in the case of relocation; and pays other consequential damages. Says Flannagan, "It's important to know you have items that aren't insured in one place [such as under your property policy] that need to be insured somewhere else."
- Independent Insurance Agents of America, www.independentagent.com.