How does equipment breakdown coverage work?

Fire, theft, and hail are all covered by homeowners insurance. It usually does not cover electrical or mechanical damage caused to appliances and systems in your home. Equipment breakdown insurance can help.

The Equipment Breakdown Coverage pays out for sudden and accidental damage caused to appliances, systems and other home equipment. The optional coverage can be used to pay for the repair or replacement of covered items when they break down because of electrical or mechanical issues.

Insurance for equipment breakdown may cover:

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  Heat and Cooling Systems
  

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  Panels and wiring for electrical panels
  

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  Heat pumps, water heaters and boilers.
  

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  Water and air filtration systems.
  

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  Appliances for the kitchen, such as refrigerators, dishwashers, ovens, and freezers.
  

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  Laundry and dryers
  

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  Home automation and alarm systems.
  

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  Electronics, computers and home entertainment systems.
  

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  Exercise equipment.
  

Certain policies will cover the costs of food spoilage caused by broken appliances or living expenses in the event that the damages render your house unlivable.

Insurance for equipment breakdown only covers mechanical and electrical failures. Normal wear and tear, or lack of maintenance are not covered. If your air conditioner stopped working due to a clogged filter, you wouldn’t have coverage under the equipment breakdown policy.

The equipment breakdown insurance does not cover damages caused by fire, hail, or lightning. These events will be covered by your homeowners insurance policy.

There are key differences between a warranty for home and equipment.

It is usually an add-on or endorsement to your homeowner’s insurance policy. This covers any electrical or mechanical damages to household appliances and systems. Home warranties are service contracts that cover the replacement or repair of certain appliances and systems within your home.

Equipment breakdown coverage is usually broader than home warranties. A home warranty only covers the specific products listed on the contract, while equipment breakdown insurance can cover many more appliances and systems.

Cost is another difference. The cost of equipment breakdown insurance is typically $25-$50 per year. It usually comes with a coverage cap and deductible (often $500). The deductible you have to pay is what is required before the insurance will kick in. Your coverage limit is what the insurer is willing to pay.

Some home warranties are more expensive than others, costing up to $500 per annum. For each claim, you may have to pay between $50 and $100 in service fees or deductibles. Often, you can’t choose the contractor who will replace your appliance or even its brand.

Before choosing between equipment breakdown insurance and home warranties, be sure you read both terms and conditions to understand what they cover.

The cost of equipment breakdown insurance is typically between $25 and $50 per annum. Check with your homeowners’ insurance provider to find out if they offer this coverage.

You can get additional financial security for the most costly systems and appliances in your house by purchasing equipment breakdown insurance. The coverage may have limitations but it can give you peace of mind knowing that your costs won’t be covered if you break your air conditioner compressor or rupture your hot water heater.

You can decide if you want to purchase equipment breakdown insurance by comparing the cost of repairs with what it would cost to include this coverage in your policy.

If you are unsure about the insurance coverage, you should check the coverage limits and the deductible to make sure you will be covered if you ever need it. Some insurers offer $100,000 of coverage with a $500 deductible.

Choose a deductible which fits into your budget and ensure that the limit is high enough to cover your home appliances.