Commercial Lines

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What does equipment breakdown cover and why should I purchase it?

Equipment Breakdown coverage is an important part of any commercial insurance program. Equipment Breakdown coverage is for loss due to mechanical or electrical breakdown of nearly any type of equipment, including photocopiers and computers. Coverage applies to the cost to repair or replace the equipment and any other property damaged by the equipment breakdown. Resulting business income and extra expense loss is often covered as well. Equipment breakdown insurance is increasingly replacing traditional boiler and machinery (BM) insurance, in part simply because the title is more descriptive of the coverage provided. Also, today’s equipment breakdown policies typically provide slightly broader coverage than traditional BM policies, and they usually do not use the specialized terminology found in traditional BM policies.

What is the difference between Replacement Cost (RC) and Actual Cash Value settlements? 

Replacement Cost Coverage is a property insurance term that refers to one of the two primary valuation methods for establishing the value of insured property for purposes of determining the amount the insurer will pay in the event of loss.   It is usually defined in the policy as the cost to replace the damaged property with materials of like kind and quality, without any deduction for depreciation.

Actual Cash Value on the other main valuation method.  ACV is typically calculated one of three ways: (1) the cost to repair or replace the damaged property, minus depreciation; (2) the damaged property’s “fair market value”; or (3) using the “broad evidence rule,” which calls for considering all relevant evidence of the value of the damaged property.

It should be specified on your policy declaration page which basis of settlement applies.  Please note that coverage on stock is always ACV.  

What is covered under a Commercial General Liability (CGL) policy? 

A Commercial General Liability (CGL) Policy is a standard insurance policy issued to business organizations to protect them against liability claims for bodily injury (BI) and property damage (PD) arising out of premises, operations, products, and completed operations; and advertising and personal injury (PI) liability.

I see that there are two types of insurance coverage available, Broad Form and Named Perils.  What are the differences?  

Named Perils Coverage is a property insurance term referring to policies that provide coverage only for loss caused by the perils specifically listed as covered.   These perils are generally as follows:  Fire or Lightning; Explosion; Impact by Aircraft, Spacecraft or Land Vehicle; Riot, Vandalism or Malicious Acts; Smoke; Leakage from Fire Protective Equipment; Windstorm or Hail.  

It contrasts with Board Form coverage, which applies to loss from all causes not specifically listed as excluded.   This policy form will list the items that are not covered.  If not on the list, then there is coverage.   These exclusions may vary from company to company, but the concept is the same.  

How does Business Interruption coverage protect my business?  

While there are may types of business income replacement coverage available the general purpose is to replace the loss of income suffered by a business when damage to its premises by a covered cause of loss causes a slowdown or suspension of its operations. Coverage applies to loss suffered during the time required to repair or replace the damaged property. It may also be extended to apply to loss suffered after completion of repairs for a specified number of days.  

Individual business owners should consult with an insurance expert to determine what form and limits of protection are appropriate for their particular business.