Understanding Machinery and Liability Insurance

If your company’s equipment or machinery breaks down or goes missing, it will negatively affect the business’ finances. Machinery is a significant business investment, and it is important to protect it in any way possible. To protect your business from any eventualities, getting machinery and liability insurance is essential.

What is Machinery and Liability Insurance and What Does It Cover?

This is a type of insurance that provides security for machines used in industries and factories such as construction, food and beverage, agriculture, mining, and so on. You can check out fast machinery insurance to get a comprehensive list of industries the policy covers.

Equipment insurance covers physical damage and accidental breakdown of machines, including the cost of getting a new one or repairing damaged parts. The policy covers losses emerging from external and internal causes such as:

  • Excessive speed
  • Loose parts
  • Structural defects
  • Short-circuiting

Some companies offer additional coverage on customs duty, third-party liability, express freight, and air freight. Below are situations that require the use of equipment or machinery insurance.

  1. Loss or damage caused by a fire outbreak from inside the machine. This situation is usually excluded from standard fire protection policies.
  2. Bursting of turbines, hydraulic cylinders, and compressors that were subjected to internal pressure or centrifugal force.
  3. Lack of technical skills or carelessness when operating and managing machinery.
  4. A fall, impact, or collision that results in a breakdown.
  5. The machine operates abnormally.
  6. Breakdown caused by faulty casting, faulty material, faulty electrical design, excess voltage, and short-circuiting that shows up after the period of warranty is over. You can click here to find out what causes these breakdowns.

This protection applies to machines in both resting and working conditions. Other conditions include dismantling, moving, and reassembling for repair, cleaning, or inspection.

Two cases represent machinery replacement costs:

1. Total Loss

The insured sum covers the real value of the items before the incidence minus its depreciation value.

2. Partial Loss

The coverage includes the complete cost of machinery parts, labor charges, custom duty, air freight, and costs of dismantling and reassembling the machinery.

How Does Machinery and Liability Insurance Work?

Basically, the policy assists companies that work with machines, so when they face a sudden breakdown, they collect the money for replacement or repair from their insurance providers. The process of claiming the cost of repairs varies from one provider to another. Generally, businesses can follow these steps to make a claim for the insurance:

  1. The policyholder should inform the insurance provider immediately after the incident occurs. You can do this via phone call, then put it in writing later for the sake of documentation and other paperwork.
  2. The policyholder must divulge adequate information about the extent and nature of the damage or losses incurred.
  3. After the incident, take necessary steps to reduce the degree of damage or loss.
  4. Preserve all defective or damaged parts because you need to present them as evidence when the insurance officer comes for inspection.
  5. Ensure you have a complete documentary of the evidence. This will be presented to the inspector on arrival to support the investigation process.
  6. After the investigation and verification of the documents you presented, the officer will initiate the claim settlement.
  7. You will submit the necessary IDs and documents to access the claim as reimbursement for the replacement you may have already handled. The money will be sent to your bank account.
  8. If you feel the officer is not handling the claim process professionally, you can contact the Regional or Branch Manager for closure. You can also visit https://www.investopedia.com/terms/i/insurance_claim.asp to learn more about insurance claims.

Benefits of Equipment Insurance

The benefits of getting insurance coverage for your machinery and equipment are as follows:

1. You Do Not Have to Worry About Repairing Expensive Parts

When your equipment breaks down, you will spend a lot of money to get it back into operation. This is especially true for situations involving complex equipment that needs to be repaired as soon as possible. Because this is an unexpected expense, it may affect your budget.

However, insurance coverage can give you a soft landing by reimbursing the cost of repair or replacing the damaged equipment. Some policies cover expenses required to speed up replacement or repair of machines, including temporary repair costs.

2. Your Business Will Not Suffer Downtimes

When a piece of equipment fails, it disrupts the business. In most cases, this disruption is quantifiable, resulting in loss of productivity and revenue. Machinery and liability insurance bears some of the costs, including any income losses your business suffered due to an incident. The protection is effective until your equipment has been replaced or repaired.

3. The Food Industry is Not Left Out

If your business does not involve construction, earthmoving machines, or mining, but you use equipment like those in the food and beverage industry, you are not left out. The machines used in the food industry are quite expensive and when they break down, they could be very expensive to repair. Not just that, the business will suffer major losses.

For instance, a business can lose products worth thousands of dollars if the refrigerator or freezer fails. Fortunately, equipment insurance offers protection and coverage for food spoilage, perishable items, or manufactured goods following the failure of the business’ equipment.

What Happens if You Fail to Get Sufficient Equipment Coverage?

If you are still not convinced about getting insurance coverage for your heavy equipment, you may need to reconsider it. Everything may be going well for your business right now, probably because you just purchased brand new machinery. But some categories of damage occur when you do not expect them; the machine won’t even give you any signal before it fails. In another instance, your worksite may be burgled and the criminals will cart away your equipment.

Without proper insurance, the finances of your business are at risk. In an attempt to replace a stolen machine or repair damaged parts, you will spend a lot of money that will eat deep into the company’s account. A good protective policy makes the difference between closing your door to clients and quick recovery after equipment breakdown.


Factories and industries must protect their machinery from foreseen and unforeseen damage. In addition to cultivating good maintenance habits, getting insurance for your equipment is beneficial. It will save you the costs of repairs or replacement even if the equipment was leased.

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