Machinery Breakdown
Insurance.

Machinery breakdown insurance is designed to cover the cost of repairing or replacing your machinery when it suffers a sudden and unforeseen mechanical or electrical failure. If your operations rely on fixed or mobile plant and machinery, an unexpected breakdown can cause significant disruption and cost. Cover responds to internal mechanical or electrical failure, not physical damage from external events.

Machinery breakdown insurance does not typically cover damage caused by external events such as fire, storm or accidental impact. Wear and tear, gradual deterioration and known defects that predate the policy are also generally excluded. Breakdown caused by inadequate maintenance or operating the machinery outside its design parameters may be excluded. Cosmetic damage and damage to consumables are also commonly excluded. Conditions and exclusions vary by policy.

There is no general law requiring businesses to hold machinery breakdown insurance in Australia. Some finance agreements, lease arrangements or contracts may require evidence of cover for specific equipment. Requirements vary by industry and arrangement.

A wide range of fixed and mobile machinery can be insured under a machinery breakdown policy. Common examples include manufacturing and production equipment, food processing machinery, HVAC systems, chillers and refrigeration plant, boilers and pressure vessels, air compressors, electrical switchboards, generators and pumps. Get in touch and we can confirm what equipment may be insurable and any conditions that apply.

Machinery breakdown premiums are based on the sum insured needed to repair or replace the specific components that could fail, not the full replacement value of the machine itself, so the insured amount and the premium are often considerably lower than a property or plant policy covering total loss. As a general guide, well-maintained equipment in a lower-risk setting such as commercial HVAC, lifts or a generator can attract an annual premium from around $1,000 to $3,000, while a manufacturing production line or processing plant can range from $3,000 to $10,000 or more. Every operation is different. The only way to get an accurate figure is to talk through your specific plant and circumstances with us.

Machinery breakdown claims vary widely. Replacing a failed electrical motor or compressor can involve tens of thousands of dollars in parts and labour. A major production line or processing plant breakdown can run into hundreds of thousands or millions of dollars in repair cost, before accounting for lost revenue during the repair period. For businesses where downtime has a direct revenue impact, the business interruption cost can exceed the repair cost.

A business interruption extension to a machinery breakdown policy is designed to cover the loss of revenue or increased costs a business incurs as a result of a covered breakdown event, during the period the machinery is being repaired or replaced. It generally responds after a waiting period and is capped at an indemnity period agreed at policy inception. The scope and conditions vary by policy. Businesses where machinery downtime has a direct and significant revenue impact may consider whether this extension is appropriate for their circumstances.

Plant and machinery insurance is designed to cover accidental physical loss or damage from external causes such as accidents, theft, fire and transit incidents. Machinery breakdown insurance is designed to cover the cost of repairing or replacing machinery that fails due to internal mechanical or electrical causes. The two covers address different risk scenarios. A business that operates plant and machinery may hold both covers, with each responding to different types of loss event.

Some business pack policies include a machinery breakdown section, but the scope of cover and the plant types included can be limited compared to a standalone machinery breakdown policy. A standalone policy typically provides more comprehensive coverage for a broader range of plant and can include higher limits and optional extensions such as business interruption. Get in touch and we can help work out whether the machinery breakdown section of a business pack is sufficient for your plant and risk profile.

Some machinery breakdown policies include cover for inspection and testing costs, including statutory inspections required for boilers and pressure vessels. The scope of this cover varies by policy. If regulatory inspection of your plant is a requirement, get in touch and we can confirm whether the policy includes this and what conditions apply.

Insurers typically ask for a schedule of machinery to be insured including type, manufacturer, year of manufacture and replacement value, the industry and nature of business operations, maintenance records and history, any prior breakdown events, whether a business interruption extension is required and the indemnity period needed. When you get in touch, we will guide you through what we need and present your risk to our insurer panel.

Notify us as soon as possible after the breakdown event. Do not authorise major repairs or dispose of failed components without first consulting us, as an assessment of the damaged machinery may be required. Retain documentation of the breakdown including any maintenance records, operator reports and photographs. We will be actively involved throughout the claims process.

A decline from a standard insurer does not mean cover is unavailable. We have access to a wider range of insurers beyond the standard market, including options for older plant, higher-risk industries and businesses with prior breakdown history. Get in touch and we can identify what options are available for your situation.