Homeowners insurance typically covers damage to your home and belongings caused by events like fire, theft and hail. But it usually won’t cover damage to your home’s appliances or systems caused by electrical or mechanical failure. That's where equipment breakdown coverage can come in.
Equipment breakdown coverage pays for damage to your home's systems and appliances. However, the damage must be from sudden, accidental breakdowns. This optional add-on can pay to repair or replace covered items that break down due to electrical issues or mechanical failures.
How does equipment breakdown coverage work?
Equipment breakdown coverage can usually be added to your homeowners policy for an extra fee. To use the coverage, you’ll typically have to pay a deductible. You'll pay for covered repairs out of pocket. Once you submit a claim to your insurer, those costs are reimbursed according to the terms of your policy.
Here’s a few examples of home appliance damage and whether equipment breakdown coverage can help.
⛈️ There’s a thunderstorm and your home loses power. When the power comes back on, the surge damages your air conditioner. Equipment breakdown coverage would reimburse you for the cost of repairing or replacing your air conditioner.
Not all damage to your home’s systems or appliances is covered. Scenarios that don’t involve electrical or mechanical failure fall outside the scope of equipment breakdown coverage.
🥶 A severe ice storm takes down the power in your area for several days. All the food in your fridge and freezer spoils. Because there was no mechanical or electrical damage to your fridge, equipment breakdown coverage wouldn’t pay for the cost of that spoiled food. However, your homeowners insurance might, depending on what caused the outage.
What does equipment breakdown insurance cover?
Equipment breakdown insurance may cover damage to:
❄️ Heating and cooling systems
If it heats or cools your home, it’s probably covered. This includes furnaces and air conditioning.
⚡Electrical panels and wiring
Damage to your home’s electrical panels and wiring may be covered.
🔥 Water heaters, boilers and heat pumps
In addition to boilers and water heaters, your coverage may also apply to built-in equipment that backs up your heating systems like solar panels and generators.
💧Air and water filtration systems
Some examples of air and water systems include HVAC, whole-house humidifiers or well pumps. Equipment breakdown might also cover sump pumps.
🎛️ Kitchen appliances
Not all kitchen appliances are covered by equipment breakdown. Think ones that are essential, large and built-in, like refrigerators and ovens.
🧺 Washers and dryers
The expensive workhorses of your washroom are usually covered by equipment breakdown coverage.
🚨Alarm systems and home automation equipment
Security and home automation gadgets that may be covered include your doorbell camera or smart home thermostat.
🖥️ Computers, electronics and home entertainment systems
Equipment breakdown covers the big-ticket electronic items in your home, including your TV, stereo and laptop.
🏋🏻♂️ Exercise equipment
If you have a home gym, some of the electrical equipment such as treadmills may be covered by this add-on.
🏊 Hot tubs, saunas and pool equipment
Equipment breakdown might cover the electrical or mechanical parts of outdoor equipment. This not only includes pools or hot tubs but also riding lawnmowers.
🥬 Spoiled food
Lose a full fridge or freezer of food due to a broken appliance? Some policies may cover the cost of spoiled food.
🏠 Living expenses
This coverage may also pay for living expenses if the damage makes your home unlivable.
What isn’t covered?
Equipment breakdown insurance only covers failures due to electrical and mechanical issues. It won't cover damage due to normal wear and tear or a lack of maintenance. So if your air conditioner stops working because of a clogged air filter, it wouldn’t be covered under equipment breakdown insurance.
Likewise, equipment breakdown coverage doesn’t cover damage caused by fire, lightning, wind or hail. Those events are covered under your homeowners policy.
How much does this coverage cost?
Equipment breakdown coverage usually costs from $25 to $50 per year. It frequently has a coverage limit and a deductible, often $500. Your deductible is how much you pay before insurance kicks in. Your coverage limit is the maximum amount the insurance company will pay for a covered loss.
Equipment breakdown coverage vs. a home warranty
While equipment breakdown coverage and a home warranty may seem similar, there are some key differences.
Equipment breakdown coverage is typically an endorsement or add-on to your homeowners insurance policy. A home warranty is a service contract that covers the repair or replacement of specific appliances and systems in your home.
One key difference is that equipment breakdown insurance is typically broader in scope than a home warranty. Equipment breakdown coverage can cover a wider range of appliances and systems. A home warranty only covers specific items listed in the contract.
Equipment breakdown coverage | Home warranty | |
|---|---|---|
How you're protected | Add-on to your homeowners insurance policy. | Separate service contract. |
What's covered | Sudden accidental breakdown. | Wear & tear. |
How you get reimbursed | File a homeowners claim. | Request service. |
Do you choose who does repairs | Yes. | No. |
What it costs | $25-$50 yearly, plus deductible ($500). | $500 yearly, service fee $50-$100 per claim. |
Another difference is cost. Home warranties can be more expensive, sometimes costing $500 per year or more. You may pay a service fee from $50 to $100 for each claim. You often don’t get to choose your contractor or the brand of a replacement appliance.
If you’re deciding between equipment breakdown coverage and a home warranty, read the terms and conditions. You’ll need to understand the differences in what each covers to determine which one is right for you.
Is equipment breakdown coverage worth it?
Equipment breakdown coverage can provide added financial protection for expensive systems and appliances. Although the coverage has limitations, it may offer you peace of mind. That way you won’t be on the hook for the entire cost if the air conditioner breaks or the hot water tank ruptures.
If you’re not sure if equipment breakdown coverage is right for you, weigh the potential cost. Compare what you’d pay for repairs against what you’d pay to add this endorsement to your policy.
You should also look at the limits and deductibles to ensure you’ll be covered in case you need to use it. For example, some insurers may offer equipment breakdown insurance with $100,000 in coverage and a $500 deductible.
Make sure the limits are high enough to replace your appliances or home systems.And be sure to choose a deductible that fits your budget.
