Equipment Breakdown Coverage: What It Is and What It Covers
TL;DR What is equipment breakdown coverage?
Equipment breakdown coverage is an optional add-on for residential home insurance policies as well as commercial property insurance that covers electronics, appliances, and mechanical equipment against sudden and accidental breakdown.
This home insurance add-on is becoming more popular for homeowners in Canada as an affordable alternative to a home warranty, but it’s typically marketed towards luxury homes or smart homes with extensive electronic or mechanical systems.
What does equipment breakdown insurance cover?
Equipment breakdown insurance typically covers appliances and home systems such as:
- Air conditioning and refrigeration systems
- Boilers and pressure vessels
- Washing machines and dryers
- HVAC systems
- Water heaters
- Pool equipment
- Home theaters and media systems
- Home automation and security systems
Equipment breakdown will typically cover sudden and accidental mechanical breakdown, but not wear and tear. If a power surge, motor burnout, mechanical failure, or electrical fault damages one of the home systems or appliances covered by equipment breakdown, your homeowners insurance might cover:
- The cost to rip out, repair, and/or replace the broken unit or system
- Additional living expenses if the breakdown makes your home uninhabitable
- Loss of rental income if your property becomes uninhabitable
- Clean and debris removal
- Spoilage of food and other perishable products
What’s not covered by equipment breakdown insurance?
The primary exclusion you need to be aware of with equipment breakdown insurance is wear and tear.
While this coverage add-on is designed to insulate you from sudden, unexpected repair bills, it won’t cover all home systems and appliance costs. If your equipment breaks down over time due to normal wear and tear, you might not be eligible for coverage.
When would equipment breakdown coverage be useful?
Equipment breakdown coverage may be useful if your home relies on a large number of electrical and mechanical systems for regular functioning. Let’s look at a few examples of potential equipment breakdown claims and how they could save you money.
A short-circuiting compressor causes the cooling unit in your home’s wine cellar to fail. Not only will you need to replace the cooling system, but all 120 bottles of wine in the cellar are ruined.
Without equipment breakdown coverage, you’d need to pay for repairs and replace all the wine out of pocket. The cooling unit costs $2,500 to repair, and the total cost of the damaged wine is $13,500, for a total of $16,000 in out-of-pocket expenses.
With equipment breakdown coverage, you could file a claim for the full $16,000, as well as any additional cleanup or replacement costs.
During a major storm, the power goes out in your neighborhood. When it comes back on after the outage, a power surge damages several appliances and home systems, including your security system, television, gaming system, washing machine, and water heater.
Without equipment breakdown coverage, you’d be forced to pay to replace all of these appliances and electronics at once—or go without them until your finances can recover. In total, you might be looking at out-of-pocket costs near $6,000 for the appliances alone, with additional costs if you need to replace your home’s electrical panel.
With equipment breakdown coverage, you could get coverage for all your property damage, along with temporary living expenses if you need to stay in a hotel or other accommodations while repairs are being completed.
Is equipment breakdown coverage worth it?
The average cost of equipment breakdown coverage varies by insurer, and not all insurance companies in Canada offer this add-on. Those who do typically price it around $30–$50/year, or less than $5/month.
For most homeowners, equipment breakdown coverage is a highly affordable option, and it offers clear value in the event of sudden mechanical or electrical failures. That said, it’s important to consider some caveats:
- Filing an equipment breakdown claim could raise the cost of your home insurance. Would the benefits of using this coverage outweigh the potential costs for you?
- Equipment breakdown insurance only covers a narrow range of incidents. It won’t cover normal wear and tear, and it won’t pay for damage caused by a peril already covered under your standard home insurance, such as fire or severe weather. Are the edge cases worth the extra cost?
- Replacing home equipment is a standard cost of homeownership. Would you incur any additional costs if your home systems failed, such as loss of rental income or valuable collectibles like wine?
If you have a standard home without many electronic or mechanical systems, replacing your home equipment out of pocket may be preferable to tying these expenses into your home insurance. On the other hand, if you own a smart home or a luxury home and there’s room in your budget, equipment breakdown insurance could be an affordable add-on.
How to add equipment breakdown coverage to your policy
You can add an equipment breakdown coverage endorsement to your home insurance in a couple of different ways:
- If you don’t have home insurance yet, ask about this option when getting home insurance quotes, either directly or through an insurance broker. Not all insurers offer it, so you may need to compare quotes from a few different carriers to find the right offering.
- If you already have an active policy, ask your insurance advisor if your current provider offers equipment breakdown insurance. Even if they do, you may want to compare quotes from a few different providers that offer the endorsement to make sure you’re getting a good deal.
Equipment breakdown coverage is always an optional endorsement, and it’s not standard for all home insurance companies. Some carriers may only offer equipment breakdown endorsements for business insurance or commercial property policies.
FAQ: Equipment breakdown coverage
This article is for general information only and is not insurance or legal advice. Examples and any sample quotes or rate ranges are illustrative and do not constitute an offer or guarantee of coverage, price, or eligibility. Actual coverage, discounts, and premiums depend on your individual circumstances and the insurer provider; if there is any discrepancy, your policy and insurer documentation govern. For advice about your situation, speak with one of our licensed insurance professionals.