Protecting your home systems, a smart move against expensive repairs.

For many businesses, there is coverage for equipment breakdown which originated from a coverage called boiler and machinery.  This coverage was designed to provide insurance for the sudden loss or damage to boilers, heating equipment, and machinery due to breakdown.  There were conditions with how the coverage worked but this specific endorsement allowed for claims to be made when a specific insured peril like fire or water damage did not cause the equipment to ‘break down’.

This type of coverage has been extended to personal lines insurance specifically on home and condominium policies.  This is an endorsement and not included in the base cost of a policy, but it can be valuable coverage, particularly when finances are tight. 

Many insurance companies will waive a deductible after a claim hits a certain threshold of cost, such as $25,000 or more, as there is no reason to collect $1000 against it to minimize costs.  But what if you have a breakdown with your furnace and it costs $3500 to replace it? 

First, without the endorsement, there is no coverage for mechanical breakdown, but in a traditional insurance scenario, the homeowner would pay $1000 (if they had a $1000 deductible) and be covered for the remaining $2500 to replace it.  With the mechanical breakdown coverage, often referred to as home systems protection or similar name the coverage can be insured and the insured could face a different deductible option as well, one that might be more affordable and not affect your claims history either.

These endorsement products are more than simply for the basics of home systems such as a furnace or HVAC system.  They can cover solar energy systems, gas lines and leaks, heat pumps, plumbing systems, and appliances and entertainment systems too.  Some innovative companies offer coverage extensions that will help fix problems within a home or its mechanical systems to prevent future losses. 

Insurance policies have never been designed to operate as warranty products or pre-paid maintenance programs. They are designed for sudden and accidental losses caused by specific perils but as homes, and technology evolve there are more risk points than ever before and that also means there are more loss points for homeowners.  Insurance companies have adapted by creating products that when coupled with traditional coverages allow for the transfer of loss and reduce financial exposure.

With many people living with a reduced income and an economy that is uncertain in recovery, insurance now provides a chance to offset financial exposure to problems that were not historically covered.  Some money spread out over the course of an insurance policy term could save more money later so it’s worth asking your broker, ‘what else can save me money in the future?’