Commercial Policy Knowledge Centre
Engineering
Policy guide
Machinery Breakdown Insurance
An engineering cover for sudden and unforeseen physical damage to insured machinery from specified internal mechanical or electrical causes, subject to the schedule and wording.
01
Who needs it
- Manufacturers, utilities, hospitals, hotels, cold stores, data centres, workshops, and facilities with critical mechanical or electrical plant.
- Businesses relying on boilers, pressure plant, generators, transformers, compressors, pumps, chillers, lifts, production lines, or automated systems.
- Asset owners whose machinery is expensive, bespoke, imported, difficult to replace, or capable of stopping an entire operation.
- Organisations needing machinery loss-of-profits or deterioration-of-stock protection alongside physical damage.
02
Core cover
- Sudden and unforeseen physical damage to scheduled machinery from covered mechanical or electrical breakdown causes.
- Repair or replacement costs subject to the valuation basis, deductible, depreciation, and settlement provisions.
- Selected surrounding-property, expediting-expense, air-freight, customs-duty, and professional-fee extensions when included.
- Optional machinery loss of profits and deterioration of stock following an insured breakdown.
03
What is commonly not covered
- Wear and tear, gradual deterioration, corrosion, erosion, scaling, cavitation, and ordinary maintenance.
- Known defects, pre-existing damage, consumable parts, tools, belts, dies, media, or components excluded by the wording.
- Fire, flood, storm, theft, and other external perils intended for the property policy, unless the engineering wording says otherwise.
- Loss of income, spoiled stock, or delayed production unless the relevant time-element cover is separately arranged.
- War, nuclear, sanctions, cyber, pollution, and other market exclusions unless modified or covered elsewhere.
04
Underwriting information
- A detailed machinery schedule with make, model, serial number, function, year, value, capacity, location, and operating hours.
- Maintenance strategy, service contracts, inspection records, vibration or oil analysis, protection systems, and operator competence.
- Duty cycle, loading, environmental conditions, utilities, process hazards, interdependencies, and single points of failure.
- Critical-spares strategy, replacement lead times, original-equipment support, obsolescence, and access for repair or lifting.
- Five-year breakdown and near-miss history, root-cause actions, insured values, and estimated interruption exposure.
05
Common mistakes
- Insuring only the purchase price and omitting freight, duties, installation, commissioning, and escalation.
- Assuming a property policy covers internal breakdown or that a maintenance contract pays consequential losses.
- Failing to update the schedule after replacing, upgrading, relocating, or adding machinery.
- Buying physical-damage cover without considering machinery loss of profits or deterioration of refrigerated stock.
- Treating preventive maintenance as optional because insurance exists.
06
Claims issues
- Preserving failed components and obtaining an independent engineering investigation before destructive repair work.
- Distinguishing sudden breakdown from excluded deterioration, inadequate maintenance, or a known defect.
- Agreeing the repair scope, replacement equivalence, depreciation, betterment, temporary repairs, and expediting costs.
- Producing maintenance, alarm, operating, inspection, and service records together with photographs and event data.
- Coordinating machinery, property, stock, and business-interruption claims where several policies may respond.
07
Critical wording points
- Definition of breakdown and the boundary between sudden damage and gradual deterioration.
- Schedule accuracy, new-replacement value, depreciation, average, and basis of settlement.
- Surrounding property, foundations, fluids, refrigerants, expediting expenses, air freight, and customs duties.
- Testing after repair, temporary repairs, obsolete parts, improvements, and manufacturer recommendations.
- Machinery loss of profits, deterioration of stock, indemnity period, time deductible, and dependency wording.
Related policies
Property All RisksBusiness InterruptionElectronic EquipmentDeterioration of StockEquipment Liability
Policy-wording boundary
This guide explains common market structures. Actual coverage may depend on the insurer, jurisdiction, schedule, declarations, endorsements, definitions, exclusions, conditions, facts, and complete policy wording. Obtain professional advice and written insurer confirmation for a specific risk or claim.