What Is Equipment Breakdown Coverage, and How Does It Work?

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.

What is equipment breakdown coverage?

Equipment breakdown coverage pays for damage to your home’s systems and appliances from sudden, accidental breakdowns. This optional add-on can help pay to repair or replace covered items that break down due to electrical issues or mechanical failures.

What does equipment breakdown insurance cover?

Equipment breakdown insurance may cover damage to:

  • Heating and cooling systems.

  • Electrical panels and wiring.

  • Water heaters, boilers and heat pumps.

  • Air and water filtration systems.

  • Kitchen appliances, including refrigerators, freezers, ovens and dishwashers.

  • Alarm systems and home automation equipment.

  • Computers, electronics and home entertainment systems.

Some policies may cover the cost of spoiled food caused by a broken appliance or pay for your living expenses if the damage makes your home unlivable.

What isn’t covered by equipment breakdown insurance?

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 from fire, lightning, wind or hail. Those events are covered under your standard homeowners policy.

What’s the difference between equipment breakdown coverage and 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. It covers electrical or mechanical damage to your household systems and appliances. 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, while a home warranty covers specific items listed in the contract.

Another difference is cost. Equipment breakdown coverage typically costs from $25 to $50 per year and usually has a coverage limit and a deductible, often $500. Your deductible is how much you pay before insurance kicks in, while your coverage limit is the maximum amount the insurance company will pay for a covered loss.

Home warranties can be more expensive, sometimes costing $500 per year or more. You may pay a deductible or 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, make sure to carefully read the terms and conditions of both so you understand the differences in what each covers.

How much does equipment breakdown coverage cost?

Equipment breakdown coverage typically costs from $25 to $50 per year. Not all insurance providers offer equipment breakdown coverage, so check with your homeowners insurance company to see if it’s available.

Is equipment breakdown coverage worth it?

Equipment breakdown coverage can provide you with added financial protection for your home’s most expensive systems and appliances. Although the coverage has limitations, it may offer you additional peace of mind to know that you won’t have to pay the entire cost if your air conditioning compressor breaks or your hot water tank ruptures.

If you’re not sure if equipment breakdown coverage is right for you, weigh the potential cost 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 for the coverage 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 choose a deductible that fits your budget.

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