Running a business that relies on machinery? Learn the benefits of having machinery insurance in place.
If your business relies on machinery and equipment to turn a profit, any problems with that machinery can cause severe financial difficulties. That’s where machinery insurance comes in.
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What is machinery insurance?
Machinery insurance is cover designed to offer protection for your business’ machinery, boilers, pressure vessels and other plant and equipment. Machinery insurance covers:
- Repair costs due to breakdown or accidental damage
- Fire and theft
- Electronic equipment damage
- Temporary repairs
- Overtime hours and express freight costs incurred to complete repairs
- Temporary plant hire costs to keep your business running
- Loss of income due to business interruption
What is generally covered under a machinery insurance policy?
Most machine insurance policies will cover you for mechanical breakdown, deterioration over time and explosion or collapse.
You are covered for:
- Unforeseen or sudden physical damage or destruction of machinery or pressure equipment.
- Replacement, repair or momentary payment for repair or replacement necessary to enable continuation of normal work.
- If past are obsolete or unavailable, the estimated cost of corresponding parts for similar pressure equipment or machinery.
- Cost of transportation, labor and the cost of parts carried onsite.
- There's usually no cover for alternations, improvements, overhauls or regular maintenance.
- Payouts for equipment replacements or repairs usually have an excess charge and salvage value that is deducted.
Deterioration of goods
You are covered if your goods are contaminated, decay or decompose due a faulty refrigerator or equipment. Causes of faulty equipment that are covered include:
- A breakdown that causes a gas concentration change
- Leaking liquid or refrigerant gas from the machinery falls
- Failure of limiting devices such as pressure controls or thermostats
- Failed electricity supply
But you should be aware of the following:
- It's up to the insurer to pay for the deteriorated goods, the cost of the equipment or both.
- No cover if the ‘used by’ date has expired on goods.
Explosion or collapse
You are covered for repairs or replacement of pressure equipment if it explodes or collapses due to:
- Internal fluid
- Steam Pressure
But you should be aware of the following:
- You will usually be covered for the lesser cost of replacing and repairing.
- Replacements usually must be of equivalent quality and size.
- Repair or replacement usually must be completed within 12 months
What kinds of machinery and equipment are covered under a typical policy?
Machinery insurance policies cover many types of machinery and equipment used in small and large businesses. This includes:
- Air conditioners
- Cash registers
- Freezers and refrigerators
- Deep fryers
- Cleaning equipment
- Indirect financial or use loss is not covered
- Damage due to lack of efficiency or performance that has been guaranteed, assessed penalties for detention or delay and liquidated damages will not be paid
- Replacement for damages that become necessary as a result of waste, ordinary wearing or gradual deterioration is not covered
- Deposits of sediments such as scale or sludge, oxidation, erosion, cavitations, corrosion or rust to equipment will not spur payment for damage to be paid. To be covered, damages from corrosive substances must manifest themselves within 24 hours of accidental contact
- Consequences, resulting from continuous or progressive influence of work done directly under chemical or atmospheric action are not covered
- Polished or painted surfaces that become rusted or scratched will not be cause for payment
- Physical damage resulting from rust or scratches is covered
- Cost of machinery being removed from a borehole and the subsequent replacement are not paid
- Non-commissioned machinery or commissioned machinery that has not operated continuously for at least eight hours does not have insured coverage
Machinery Damage Exclusions
- Machinery damage, destruction or loss that is caused directly or indirectly from the following is not covered.
- Damages caused by fires, explosion not specified in a schedule, chemical explosion, spontaneous combustion or fermentation are not subject for payment.
- Destruction from heating or the process involved in direct heat application that cause a fire will not be covered.
- Loss due to articles dropped by aerial devices, aircrafts or the vehicles themselves is not covered.
- Destruction from a sonic boom will not be paid.
- Destruction caused by volcanic eruption, subterranean fire and earthquakes is not covered.
- Loss due to flood, high water, tidal waves, tsunami, action of water from the seas, hail wind, rainwater, tempests or storms will not be paid.
- Damage caused by reticulation systems, appliances or apparatuses that leak or overflow is not covered.
- Destruction from discharged substances, liquids or water is not payable.
- Vandalism, civil commotions, riots; labor disturbances that cause machinery loss or destruction are not covered.
- Loss as a result of civil authorities attempting to prevent fire from spreading will not be paid. Payment will not be made for losses due to demolition or incorrect sitting ordered by any level of government.
- Unexplained inventory disappearance or shortages, damage occurring during or prior to delivery, theft and attempted theft are not covered.
- International experimenting or overloading that result in destruction will not be compensated. Known defects, not disclosed when insurance is arranged will not be protected.
- Coverage will not be extended to cold chambers with faulty or damaged closing or securing mechanisms.
Some machinery insurance policies also offer extra benefits and cover options.
Increased Working Costs
This option covers:
- Temporary repairs
- Temporary hiring of pressure equipment or machinery
- Data programming for machinery controlled by computers
- Overtime and express freight that includes overseas airfreight
It doesn't cover:
- Expenses for consultants or ‘specialists’ travel from outside Australia
- Chartered airfreight or overtime charges that exceed 50% of a standard rate.
- Repairs to equipment on loan from a third party are not covered.
Refrigerant or Insulating Oil Costs
Some policies provide cover for:
- The cost of refrigerant gas or liquids from refrigeration or air conditioning units
- Insulating oil from capacitors or transformers
Automatic Reinstatement of Insured Sum
If you're paid out for deterioration the insured sum will be reinstated. You may need pay an additional required premium.
If you're insured sum is not depleted after deterioration, you can get cover for the reasonable expenses incurred to minimise or prevent loss of goods.
Automatic Coverage of Additional Pressure Equipment and Machinery
Some policies provide:
- Extended coverage for additional pressure equipment and machinery that is installed after a policy’s inception.
But be aware that:
- The additional equipment must be similar in type and class of listed schedule items.
- The additions can have no known defects.
- Coverage begins when additions have become the responsibility of the insured and have operated continuously for at least eight hours.
With prior consent from the insurer you will be paid for reasonable charges incurred to dispose of damage goods.
Machinery insurance offers crucial financial protection for a wide range of businesses, from small operations through to large construction businesses running hundreds of machines.
Does your business rely on machinery?
Even if your business only runs one machine, if it breaks down for an extended period, would your business be able to continue operating and keep turning a profit?
Plant and machinery insurance provides peace of mind for any business that relies on machinery to keep the money rolling in. It means your equipment and machinery is protected against the unknown element of the future and a range of common risks, allowing your business to keep running even if your machinery is not.
There are a number of factors that will impact how much you pay for machinery insurance. These include;
- The type of equipment
- If it's new or used equipment
- The size of a motor
- Whether or not the motor unit is sealed
- Age of a machine
- Machinery that is serviced regularly may be eligible for a discount.
For these reasons, insurers are reluctant to post insurance quotes. Those seeking machinery insurance will need to speak directly to an insurance agent or broker.
I have a few more questions about machinery insurance
What do I need to tell my insurer when taking out cover?
When taking out insurance cover of any kind, it’s vital that you disclose any relevant details to your insurance provider. Be honest and supply any pertinent details your insurer may need to underwrite your policy — if you fail to do so, any claims you make in the future could be jeopardised.
How much machinery insurance cover do I need?
It’s not possible to provide a stock answer to this question as the amount of cover required will differ from one business to the next. Consider the type of machinery you have, how much you have, the likelihood of it suffering a breakdown and what the financial consequences would be if that occurred.
How can I compare machinery insurance policies?
Using finder.com.au’s resources to compare the features of different policies is a good place to start. Compare product disclosure statements to familiarise yourself with the features of each policy, as well as any limits and exclusions which may apply. Obtaining multiple quotes will also help you understand exactly what you can get for your money.
Where can I get help to find the cover I need?
If you require assistance finding the right type and level of cover, which many businesses do, seek out the services of an insurance broker. Brokers work in your best interests to examine the insurance needs of your business, then help you find an insurance policy that suits.