What does equipment breakdown insurance cover—and how does it differ from commercial property insurance?

By Mark Melliand, owner, Melliand Insurance Agency · 13 years as an independent agent · Published October 27, 2026

The short answer

Equipment breakdown insurance, sometimes called boiler and machinery coverage, may cover damage arising from equipment events defined in the policy. Examples include a mechanical failure, electrical arcing or the rupture of a pressure vessel. These are causes a commercial property policy may exclude. Depending on the form and what you buy, equipment breakdown coverage may also pay certain related losses, such as spoiled inventory, lost business income, extra expenses and the cost of speeding up repairs.

Whether a particular loss is covered depends on the actual policy:

• which equipment it treats as covered
• how it defines a breakdown or “accident”
• its exclusions
• the limits and deductibles shown in the declarations
• any endorsements

This guide explains what to review. It doesn’t predict how any claim will be decided.

How equipment breakdown differs from commercial property insurance

The Texas Department of Insurance (TDI) explains that special form commercial property policies “usually cover damage from all causes of loss, except those specifically listed in the policy,” and notes that most policies exclude wear and tear, among other causes. TDI separately describes boiler and machinery coverage as covering “boilers, air conditioning units, compressors, steam cookers, electric water heaters, and similar machinery.”

As an illustration, we reviewed the unendorsed standard ISO Causes of Loss – Special Form CP 10 30 09 17, as published in a Conifer Insurance property forms package. That illustrative base form excludes:

• artificially generated electrical energy, including electrical current and arcing, that damages electrical or electronic devices or systems. It still pays for loss caused by a fire that results.
• explosion of steam boilers, steam pipes, steam engines or steam turbines owned or leased by you or operated under your control. It still pays for a resulting fire or combustion explosion.
• wear and tear; rust, corrosion, decay and deterioration; and mechanical breakdown, “including rupture or bursting caused by centrifugal force.” There is an exception when one of these results in a “specified cause of loss” or building glass breakage.

Endorsements can change these exclusions. The reviewed form also contains resulting-loss exceptions, including an elevator-collision exception to its mechanical-breakdown exclusion. Review the complete wording rather than treating this summary as a complete exclusion list.

An equipment breakdown form works from the other direction. For example, the HSB TechAdvantage Equipment Breakdown Coverage Form TEC150 07/2015 covers an “accident” to “covered equipment.” It also covers “electronic circuitry impairment” when the declarations include it.

That same form excludes fire and combustion explosion. The reviewed HSB form excludes covered causes of loss resulting from lightning and contains a windstorm-or-hail exclusion with a limited exception. Check the full exclusion and any endorsements alongside your property policy.

The two kinds of coverage are designed to work together. Whether yours leave a gap or overlap depends on the actual forms, so review them side by side. For the property side, see our guide to commercial property insurance coverage in Texas.

What equipment may be eligible

Insurers describe a wide range of equipment. HSB, an equipment breakdown insurer, lists categories that include:

• electrical systems
• production and mechanical equipment
• air conditioning and refrigeration
• boilers and pressure vessels
• business equipment and systems
• electronics, including computers
• communication systems

The Hartford similarly describes coverage for mechanical, electrical and computer systems and appliances.

Eligibility is set by the policy, not by these lists. In the illustrative HSB form TEC150 07/2015, “covered equipment” generally means:

• equipment that generates, transmits or uses energy, including electronic communications and data processing equipment
• equipment that operates under vacuum or pressure

Covered equipment generally must be at a location shown in the declarations and owned or leased by you or operated under your control. The form gives exceptions for certain coverages.

The same form lists items that are not covered equipment, including:

• structures and foundations
• cabinets, conduit and ductwork
• buried vessels or piping
• sprinkler system piping
• vehicles and equipment mounted on them
• excavation and construction equipment
• equipment you manufacture for sale
• data

Mobile tools and contractors’ equipment are often handled under other coverage. See our inland marine insurance guide.

Mechanical, electrical and pressure-system events

In the illustrative HSB form TEC150 07/2015, an “accident” is “a fortuitous event that causes direct physical damage to ‘covered equipment.’” The event must be one of the following:

• mechanical breakdown, including rupture or bursting caused by centrifugal force
• artificially generated electrical current, including electrical arcing, that damages electrical devices, appliances or wires
• explosion, other than combustion explosion, of steam boilers, steam piping, steam engines or steam turbines
• an event inside steam boilers, steam pipes, steam engines or steam turbines, or inside hot water boilers or other water heating equipment, that damages that equipment
• bursting, cracking or splitting

HSB’s general description of covered breakdowns also lists short circuits, power surges and boiler breakdown. Other insurers’ forms may define covered events differently, so read the definition in your own policy.

Wear and tear, maintenance and the worn part

Equipment breakdown coverage isn’t maintenance coverage. The illustrative HSB form says that none of the following is an “accident,” however caused:

• depletion, deterioration, rust, corrosion, erosion, settling or wear and tear
• any gradually developing condition
• misalignment, miscalibration, tripping off-line, or any condition that can be corrected by resetting, tightening, adjusting or cleaning, or by performing maintenance

The same form adds: “However, if an event as defined under 1.a. above results from any of the following, it will be considered an ‘accident.’” In other words, under that form wear by itself isn’t a covered event, but a listed event such as a mechanical breakdown that results from wear can be.

The reviewed form doesn’t separately say how the worn component itself is treated compared with the damage the breakdown causes. If that distinction matters to you, ask how your policy handles it.

The reviewed sources also don’t address manufacturer warranties or service contracts. Ask whether your policy says anything about repairs that a warranty or service agreement may cover.

Repair, replacement and valuation

Valuation terms vary. In the illustrative HSB form TEC150 07/2015, payment for damaged covered property is generally the smallest of:

• the cost to repair it
• the cost to replace it on the same site
• the amount you actually spend that is necessary to repair or replace it

The same form also:

• bases payment on “the most cost-effective means to replace the function, capacity and remaining useful life” of the property, which may include generic, used or reconditioned parts
• generally requires you to pay the extra cost of better or larger replacement equipment, except under its environmental, safety and efficiency improvements provision
• pays on an actual cash value basis, which includes deductions for depreciation, for property not repaired or replaced within 24 months after the loss, property that no longer serves a useful or necessary function, and property for which the declarations specify actual cash value

These are the terms of one specimen form. Check your own policy’s valuation provisions.

Spoilage, business income, extra expense and expediting expenses

Many equipment breakdown forms list related coverages, but each applies only if it’s included and subject to its own conditions. The illustrative HSB form lists coverages that include:

• business income
• extra expense
• expediting expenses
• perishable goods
• data restoration
• service interruption

The form says each coverage “is subject to a specific limit as shown in the Declarations.” The coverages apply only to the direct result of a covered cause of loss, and only to the portion of the loss “solely attributable” to it. Under that form:

• Expediting expenses means the reasonable extra cost to make temporary repairs and to expedite permanent repairs or replacement of damaged covered property.
• Perishable goods coverage addresses spoilage. It also addresses spoilage that results from an “interruption of service” and contamination from a refrigerant release, including ammonia.
• Business income and extra expense apply during a defined “period of restoration.”
• Deductibles: multiple deductibles may apply to one breakdown unless the declarations show a combined deductible.

A commercial property policy’s business income coverage is a separate question. See our guide to business income and interruption insurance.

Utility and service interruption: your equipment or someone else’s

Where the failure happens matters.

If your own covered equipment breaks down, your equipment breakdown coverage is the starting point. If an outside provider’s equipment fails, different provisions apply.

The illustrative ISO special form CP 10 30 09 17 excludes failure of power, communication, water or other utility service supplied to the described premises, however caused, if the failure:

• originates away from the premises, or
• originates at the premises but involves equipment used to supply the service from an outside source

It also excludes a power surge that would not have occurred but for an event causing a power failure. If the failure or surge results in a covered cause of loss, the form pays for the loss caused by that covered cause of loss.

The illustrative HSB form includes “service interruption” coverage for business income and extra expense resulting from an “interruption of service.” Its perishable goods coverage addresses resulting spoilage. In that form, the interruption must be caused by an “accident” to covered equipment that is either:

• owned by a company with which you have a contract to supply the service, or
• used to supply you with the service and located within one mile of a location shown in the declarations

The declarations may also show a distance limitation and a waiting period. The definition doesn’t include a supplier that could have continued service but chose to reduce or stop it.

Ask how your policy treats outages caused by storms, grid events or a provider’s decisions.

Landlord-owned, leased or customer equipment

Who owns the equipment, and who agreed to insure it, matters. In the illustrative HSB form, covered equipment generally must be owned or leased by you or operated under your control. Covered property includes property you own, or property in your care, custody or control for which you are legally liable.

A landlord’s HVAC system, a leased compressor or a customer’s machine could fall under your policy, the owner’s policy or both. That depends on the policies and on what your lease or equipment agreement requires. Review those documents with your agent, and direct questions about what a contract means to your attorney.

See our guide to commercial lease insurance requirements in Texas.

Computers and electronics: not a substitute for cyber insurance

Equipment breakdown coverage can apply to computers and electronic equipment. HSB lists electronics, including computers, and the illustrative form includes data processing equipment within covered equipment. The same form also sets limits:

• It doesn’t treat “data” as covered equipment.
• Data-related conditions, including programming errors, viruses, malicious code and loss of data or access, are not themselves accidents under the reviewed definition. However, that definition allows a listed physical-damage event resulting from such a condition to qualify as an accident, subject to the remaining policy terms.
• Its “electronic circuitry impairment” coverage applies only when the declarations show it as included, and excludes conditions that can reasonably be remedied by normal maintenance, rebooting, or reloading or updating software.

The form does list data restoration coverage, subject to its own terms and limits. But breach response, cyber extortion and network security liability are cyber insurance questions. See our guide to what cyber insurance covers.

Included in a package, added by endorsement or a separate policy

Equipment breakdown protection can be arranged in different ways. HSB says it provides equipment breakdown coverage through property-casualty insurers, agents, brokers and managing general agents, so the coverage may appear as part of another insurer’s policy. The Hartford offers it to small businesses. The HSB form reviewed here is a separate coverage form that works with its own declarations.

Don’t assume your business owner’s policy or property policy includes it. Check your declarations and endorsements for the coverage, its limits and its deductibles. See our business owner’s policy coverage guide.

Comparison: exposures, coverage and questions

Exposure	Coverage to review	Questions to ask
HVAC, boiler or water heater breaks down	Equipment breakdown property damage; property policy exclusions	Is this equipment “covered equipment”? How does the policy define a breakdown or “accident”?
Electrical arcing or a power surge damages equipment	Equipment breakdown; the property policy’s electrical and utility services provisions	Does the cause matter, such as an internal fault, lightning or a utility event? Which policy addresses each cause?
Refrigeration fails and inventory spoils	Perishable goods or spoilage coverage, if included	Is spoilage included? What limit and deductible apply? Does it address spoilage from an outside service interruption?
Production equipment fails and operations stop	Equipment breakdown business income, extra expense and expediting expenses, if included	How is the period of restoration defined? Which deductibles or waiting periods apply? Are expediting costs included?
A utility or service provider outage	Service interruption coverage; property policy utility provisions	Must the outage result from an accident to the provider’s equipment? Is there a distance limitation or waiting period?
Worn or poorly maintained equipment	Breakdown or “accident” definition; wear-and-tear terms	How does the policy treat wear, gradual conditions and breakdowns that result from them?
Leased or landlord-owned equipment	Covered equipment and covered property definitions; lease or equipment agreement	Who is required to insure the equipment? Does your policy include property in your care, custody or control?
Computers and electronics	Equipment breakdown, including any electronic circuitry impairment and data restoration terms; cyber insurance	Is electronic circuitry impairment included? Which data and cyber events are excluded?

Three examples to talk through

These hypothetical examples are for discussion only. Coverage depends on the facts and the actual policy language.

1. A power-related event damages equipment

A shop’s compressor and control panel stop working after an electrical event. Questions to review:

• Did the damage come from an internal electrical fault, lightning or a problem on the utility’s side?
• Which policy addresses that cause: equipment breakdown, property or both?
• Is the damaged item “covered equipment,” and is electronic circuitry impairment included?
• What deductibles apply?

2. Refrigeration stops working and inventory spoils

A restaurant’s walk-in cooler fails overnight, and food is discarded. Questions to review:

• Did the cooler itself break down, or did an outside power supply fail?
• Does the policy include perishable goods or spoilage coverage, and does it address service interruptions?
• What limit, deductible and any waiting period apply?
• What records show the inventory’s value?

3. Production equipment fails and operations slow or stop

A manufacturer’s key machine breaks down, and output stops until a replacement part arrives. Questions to review:

• Does the policy include business income and extra expense for equipment breakdown?
• How is the period of restoration defined?
• Are expediting expenses, such as rush shipping or overtime for repairs, included, and under what limit?
• How does the valuation provision treat repair versus replacement?

Checklist before you review your coverage

• Equipment descriptions: list key equipment, such as HVAC, refrigeration, boilers, electrical panels, production machinery and computers, with make, model, age and location.
• Ownership: note which equipment you own, lease or rent, which belongs to a landlord or customer, and what each lease or agreement says about insurance.
• Maintenance records: keep service logs, inspection reports and repair invoices.
• Replacement values: estimate what it would cost to repair or replace each key item today, including lead times for parts.
• Dependencies: identify which equipment and outside services, such as power, water, gas and internet, your operations can’t run without.
• Existing policies: gather your property, BOP, equipment breakdown, inland marine and cyber declarations and endorsements.
• Possible interruption expenses: think through spoilage, lost income, rental equipment, overtime and rush shipping if a key item fails.

Sources

• Texas Department of Insurance, Commercial property insurance guide
• HSB (The Hartford Steam Boiler Inspection and Insurance Company), Frequently Asked Questions
• HSB TechAdvantage Equipment Breakdown Coverage Form TEC150 07/2015 (© 2015 The Hartford Steam Boiler Inspection and Insurance Company; includes copyright material of Insurance Services Office, Inc. with its permission). Illustrative specimen; not confirmed current Texas policy terms.
• ISO Causes of Loss – Special Form CP 10 30 09 17, as published in Conifer Insurance’s property forms package. Illustrative specimen; not confirmed current Texas policy terms.
• The Hartford, Equipment Breakdown Insurance

About Melliand Insurance Agency

Melliand Insurance Agency is an independently operated insurance agency affiliated with Premier Group Insurance (PGI), a nationwide agency network.

If you’d like help reviewing how your current policies treat equipment breakdown, call (972) 346-4666 or email melliandinsurance@gmail.com, Monday–Friday, 8 AM–5 PM Central.

This article provides general information only. It is not legal advice and is not a statement of coverage under any policy. Coverage depends on the actual policy forms, endorsements, declarations and the facts of a loss. The specimen forms described here are illustrative examples identified by form and edition. They are not confirmed current Texas policy terms and may differ from the forms an insurer uses for your business. For questions about what a lease or contract requires, consult an attorney.