Standalone engineering insurance has long been an important risk mitigation tool for larger businesses with substantial manufacturing and industrial risks.

But it can also be invaluable for small-to-medium-sized businesses.

So, who should consider it, and what's the difference between a business pack machinery breakdown section and a standalone policy?

What does engineering insurance cover?

Engineering insurance helps protect small businesses faced with sudden and unforeseen breakdowns to machinery of many different kinds.

Machinery and plant could include air conditioners, boilers, chillers, Computer Numerical Control (CNC) machines, commercial ovens, cool rooms and refrigeration, exhaust fans, pumps, control panels, generators, metal press machines and switchboards – to name just a few.

Which small businesses should consider engineering insurance?

Brokers play a vital role in understanding a business’s risks relating to equipment and machinery.

Brokers should find out if the client has machinery or plant that’s essential for the firm to operate, says Joel Edwards, Engineering Product Manager at Miramar Underwriting Agency.

“For a café, this might be cool rooms or for a pub, it might be a glycol chiller system. Meanwhile, a CNC machine is a vital piece of equipment for a metal fabrication business,” Joel says. “In each of these examples, equipment failure would likely mean the business would have reduced trading capacity.”

“If a piece of essential equipment breaks down, the question is whether the client has enough cash flow or contingency funds to pay for repairs themselves so that they can get back to trading normally as soon as possible.”

Your clients should consider whether a lower limit under a business pack policy will provide enough cover in 2024, amid higher inflation and economic pressures. If your client still plans to self-insure, do they understand how much it could cost to repair their machinery if it breaks down or is damaged?
Engineering insurance is worth considering if those costs would be difficult for your client to front.

Business pack or standalone engineering policy?

Business pack insurance typically includes a $20,000 limit to cover equipment breakdown.

While this may be sufficient for businesses that don’t rely on much machinery or plant to operate, it may leave others that do short-changed, as economic pressure sees claims costs rise.

With a bigger repair bill on the cards, a higher limit under a standalone engineering policy could be a more attractive option for many businesses.

“If clients wish to self-insure, it’s essential they know the true cost involved with repairing their plant and machinery, if it breaks down,” Joel says. “It’s wise to assess whether your client’s assets may be better covered under a standalone engineering policy.”

Please take some time to compare the limits and features of a standalone machinery breakdown cover and the standard machinery breakdown section in a business pack.

What your clients should consider

Here are some other considerations for your clients looking to protect against machinery risks.

New equipment under warranty

A client might be reluctant to purchase a machinery breakdown policy if their equipment is still under warranty.

However, it is important to remember that warranties sometimes do not cover breakdown events such as a power surge, fusion, resultant damage, or a breakdown related to employee error.

This could leave businesses with certain risks vulnerable. For example, a local power grid supply can lead to regular power surge events or fluctuations, a common cause of insurable damage that isn’t covered under many warranties.

Machinery maintenance

In the same way that a car will break down if it’s not serviced properly and regularly, machinery that is not maintained will also break down.

“One thing that helps underwrite machinery breakdown risks is information on the age and maintenance of the equipment,” says Joel.

“As underwriters, if we can see that the clients regularly check and maintain their equipment, it gives us a level of comfort about the risk exposure. If we’re confident maintenance is managed in-house, by a third-party contractor or looked after under an Original Equipment Manufacturer (OEM) contract, it helps us assess the risk and offer better terms."

Talk to Miramar's specialised team

Engineering insurance can be a crucial safeguard for small businesses, ensuring they can quickly recover and continue operations when essential machinery breaks down. Miramar's Engineering Insurance is designed to suit a wide range of industries and businesses of all sizes.

Get in touch with our specialised underwriting team today to learn more.

Miramar Underwriting Agency Pty Ltd (‘Miramar’) acts under binding authority as agent for Zurich Australian Insurance Limited (‘Zurich’), the insurer of the products.