If your business depends on equipment that you've leased or purchased, it's a smart move to make sure you have adequate business equipment insurance.
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Damage to your machinery and equipment can result from numerous sources, including mechanical breakdown, electrical current, and arcing. Theft can also be an issue. When equipment breaks down or is stolen, it's a double whammy. You not only have the costs of repairing or replacing the equipment, you also may find that you lose business income because the equipment is not available.
As such, it pays to make sure you have the proper business equipment insurance coverage.
Companies that lease equipment are especially vulnerable. Many small business owners rely on expensive leased equipment but do not have enough leased equipment insurance to cover a total loss scenario. If they are underinsured, they could be facing a very expensive payment to the leasing companies. In the event of destruction of the property, many equipment leases require the lessee to replace the damaged equipment or to pay off the balance of the lease.
Imagine a scenario where you lease a $100,000 piece of equipment and it's destroyed the day after you lease it. Suddenly you've got a $100,000 liability to the leasing company. Ouch!
Make sure your business equipment insurance covers loss of business income resulting from equipment damage. Business income coverage protects you when a covered loss interrupts your business. There are various limits depending on the coverage you need.
As with all insurance, when you purchase business equipment insurance it pays to read the fine print. One business we know had insurance coverage for fire, lightning, explosion, windstorm, hail, smoke, riot, strike, vandalism, theft (with visible signs of forced entry), flood, goods in transit cargo coverage, and malicious mischief for the full depreciable value, repair of the equipment, or payoff the lease contract, whichever is less. Sound like they were well-protected, doesn't it?
But what this particular small business owner didn't realize was that there was an exclusion for earthquake damage. When a small quake in California resulted in damage to their office computers, they found out that they were not covered.
Another business owner found out that his business equipment insurance covered him for a broken computer, but it only covered the physical computer equipment, not damage to or loss of data. His data restoration costs were $1,500 and it all came out of his pocket, instead of being covered by insurance.
Finally, a small business owner with leased equipment found out after a loss that his business equipment insurance only covered the ACV (actual cash value) of the equipment, not the replacement costs. Usually, the ACV is much lower than the replacement costs, so if you have ACV coverage, you are probably
Don't let these insurance horror stories happen to you. Make sure you read all the fine print on your business equipment insurance policies.
It's also important to update your business equipment insurance policies over time. Each time you buy new equipment, you may have to update your insurance rider in order to make sure the equipment is covered. If you forget to make the updates, you may not be covered.
If you are concerned about whether you are adequately covered with equipment insurance, contact your insurance agent and ask for a business equipment insurance consultation. Run through a variety of scenarios with your agent, and make sure you are happy with the outcomes.
With the right business equipment insurance in place, you'll be able to rest easy and focus on growing your business.