Boiler and Machinery (BM) Insurance

What Is Boiler and Machinery (BM) Insurance?

Boiler and machinery insurance (BM) provides coverage for physical damage to and financial loss from equipment breakdown. Boiler and machinery insurance, also called equipment breakdown insurance, covers the cost of repairing or replacing the damaged equipment and business losses incurred from the equipment not functioning. Boiler and machinery insurance can cover a wide range of equipment besides boilers and furnaces, including elevators and office equipment.

Understanding Boiler and Machinery (BM) Insurance

Boiler and machinery insurance covers the risk that equipment, used by a business to deliver goods and provide services, will not function properly. Companies purchase this type of insurance to protect equipment much in the same way as property insurance protects buildings, and liability insurance protects workers from injuries.

Commercial property insurance typically covers external factors impacting a business, such as a fire. As a result, businesses would need to buy boiler and machinery insurance to cover internal issues regarding equipment damage or failures, which can stop a company's operation from running.

Damage Covered by Boiler and Machinery Insurance

Boiler and machinery insurance is a specialty insurance and is often purchased by manufacturing companies since the equipment needs to run constantly. However, there are many other examples of the types of equipment that's covered, which can include other industries besides manufacturing. The coverage is typically broken down into five categories.

Mechanical Breakdown

Manufacturing equipment, machines, motor burnouts, water pumps, generators, engines, ovens, copiers, cash registers, and any other machines used in business operations

Technology

Computers, phones, voice mail as well as fire alarm and security systems

Electrical Issues

Includes electrical failure, issues with cables, transformers, power surges, and short circuits

Air Control

HVAC or heating and air conditioning systems, refrigeration units

Boilers and Equipment

Any pressure gauges, valves, and boiler equipment

Many modern technologies have not been around long enough for us to completely understand how the equipment can be damaged. For example, electricity surges can severely damage a computer’s electronics, rendering the machines useless for conducting business. Boiler and machinery insurance is most appropriate for businesses that need more specialized coverage than what is available through property insurance.

Benefits of Boiler and Machinery (BM) Insurance

Boiler and machinery insurance coverage extends beyond providing financial reparations for damaged equipment. The BM policy also makes the company financially whole for any losses or costs as a result of the equipment damage. BM policies typically provide financial relief in the following ways:

• Costs to repair or replace damaged equipment, including labor costs and parts 
• Lost revenue or income due to downtime or damage done to equipment
• Spoiled inventory or covering the cost of replacing perishable goods, which can occur due to failed refrigeration equipment
• Any costs that were incurred as a result of the time it took to repair the equipment and restore business operations 

Repackaging of Boiler and Machinery Insurance

Rather than the BM coverage only being available as a monoline insurance policy, increasing numbers of insurance companies now offer it, either as an endorsement or as an integral element of a packaged product, such as a business owners policy.

In addition, because of an increase in equipment that uses some type of “electronic brain,” microprocessor or low-voltage circuitry, financial risk exposures are changing, which are causing changes in premiums. This trend towards more microprocessor-based equipment has significantly increased the risk of equipment failure due to power surges, power quality problems, and other types of physical factors, including moisture, heat, and cold.