Equipment Breakdown – What is it? Do you have it? Is it worth adding?
Let’s start with the first question. What is equipment breakdown for a farm? Basic farm policies do not provide proper coverage for those who own, rent, borrow, or operate machinery or equipment that is under pressure or is at risk of mechanical breakdown. Equipment breakdown coverage is tailored to cover losses on insured property. Four major exposures to loss that equipment breakdown covers (that your basic policy will not) is mechanical breakdown, electrical breakdown, steam explosion, and spoilage. Equipment breakdown will not cover wear and tear to equipment or machinery, but may cover the resulting damage. In most cases, farmers have this type of equipment/machinery and have an exposure to the losses equipment breakdown offers.
Do you have it?
That depends. Some companies will automatically add this coverage to your farm policy and some won’t. Your policy will always have a list of forms it carries. If the form is not on that list, you do not have the coverage. There are two parts to this coverage- the physical damage and the loss to income. Some forms will cover both, but make sure you read the form included to verify what the equipment breakdown coverage is providing in your specific policy.
Is it worth adding?
YES!!! As a farmer, you are constantly working with equipment and machinery that is vulnerable to the four major exposures. As a dairy farmer, you have milk tanks that need to stay cold. If your electric is interrupted due to fire or lightening, not only does it ruin the coolers on the tank, but you also lose the milk. Equipment break down will cover the physical loss to the cooler and the spoilage of the milk. As a crop farmer, your harvester could take in a rock or piece of metal that could tear up the mechanicals. This damage is covered under equipment breakdown. No matter where you have your insurance, this coverage should always be talked about and included in your coverage!
By Samantha Brensinger
Resources: IRMI Risk & Insurance AFIS, ISO