Machinery damage and breakdown insurance: how to defend against costly breakdowns

For many manufacturing businesses, keeping machinery in good working order is integral to their success and survival.

But when machinery suffers a breakdown or is damaged, the costs to repair or replace can be expensive.

That’s why it’s vital to have a separate machinery insurance policy to plan for unforeseen damage or mechanical breakdowns resulting in production interruptions.

Why take out enhanced machinery cover?

The unforeseen increase in machinery repair costs are a significant challenge facing manufacturers and precision engineers.

Industry operators must factor in the costs of maintaining more technologically advanced machinery. Whether it’s large industrial machinery or something smaller, whatever your industry, a repair or replacement can be very costly.

How you can fund the repair or replacement?

Thankfully, protection is available to help your business get your machinery back up and running as soon as possible.

With the current economic challenges, you may look at ways to cut costs. But having adequate insurance cover is worth the investment, especially when you need to deliver products and services to your customers on time.

How we can help

If you’re a manufacturer or a precision engineer, we can provide insurance cover for your plant and machinery and minimise business disruption, delays, and costs. This is your best protection against unforeseen events.

Enhanced machinery cover runs alongside your general insurance, not as a replacement, providing far more comprehensive cover. For example, the MACH 3-5-7 insurance policy is specifically designed for industrial and commercial machinery operators. Cover can include damage caused by operator error for up to a maximum seven-year cover term (subject to eligibility).

If your machinery suffers a breakdown or damage, the repair cost can be very costly, in some cases costing you hundreds of thousands.¹

Costly machinery damage and breakdown claim examples

Machinery damage and breakdown insurance is essential, especially when your business relies on the machinery to function.

Damage or mechanical breakdown of manufacturing equipment could result in costly repairs or replacement. Operator error when programming or operating machines, electrical short circuits, and spindle failure and faults are just a few causes of unexpected machinery breakdowns.

We’ve seen some recent examples of machinery losses where the cost has been staggering, especially if the machines had larger or more expensive parts. This is why machinery damage and breakdown insurance is so important.

Some examples of damage and breakdown claims we’ve seen include:

Reason for claim	Total claim paid
Operator error - collision on the machine.	£93,000
Severe collision causing extensive damage to spindle and machine.	£49,000
Collision between drill and component.	£44,000
Tool door would not open or close properly. The shaft on the gearbox had broken, and the spindle was running out as a result of a collision.	£42,000
Spindle overheated - needed replacing	£40,000
Damage to the spindle/motor and broken window. The tool had hit partly due to an operator error.	£36,000
Incorrect programme entered by an employee resulting in a collision on the machine.	£33,000
Machine suddenly stopped mid-cycle during the night.	£32,000
The operator forgot to cancel a datum shift, the cuter body ran into the side of the machine vice, causing a collision.	£25,000

 

These claims listed are based on Marsh Commercial data from 2018 to 2023.¹

Why do breakdowns happen?

Operator error makes up a large part of the claims we deal with, and mistakes can happen more than once.

We’ve worked with a leading insurer to develop the MACH 3-5-7 insurance policy to protect your machinery. Our enhanced machinery insurance covers breakdown and accidental damage.  You’ll be covered for damage arising from operator error during normal machinery operations.

MACH 3-5-7 – benefits of the product

You can choose up to seven years’ flexible cover by taking out our enhanced machinery cover.

We can protect almost any new or used fixed and installed machine under ten years old. We have a few exceptions: food processing, pre-press and digital print machinery or machinery used in recycling, reclamation, or waste disposal.

Another big advantage we include is being allowed to choose your repairer—whether that be the quickest, most convenient or your in-house engineer (subject to policy limits).

How else can it help you save money?

Depending on the terms and conditions of your insurance policy, any claims arising from machine breakdown could result in a hike in premiums at renewal.

However, with MACH 3-5-7, once you’ve selected the length of the policy, regardless of the number of losses, your premium won’t rise throughout the agreed policy lifetime. (Excluding insurance premium tax increases).

So, you’ll benefit from year-one prices for up to seven years. As with all insurance policies, exclusions apply.

Are you already covered?

Warranties may not always provide the cover you expect. For example, extended warranties don’t usually include breakdown or accidental damage caused whilst in operation or cover operator error claims.

You may need greater protection than your existing guarantees and warranties if your machine suffers damage or a breakdown.

Manufacturer guarantees have limitations and usually only last for a year. A separate insurance policy allows you to secure protection for your machine for longer than conventional insurance policies or repair contracts. This is where machinery damage and breakdown insurance has you covered.

New machinery claims—the stats

Although the purchase of a new machine may be supplied with a manufacturer's guarantee or warranty, these warranties have limitations and often don’t cover accidental damage. Insurance cover is essential — even for new machines.

Machinery claims are just as likely to occur in the first year as in the final year of cover. According to Marsh Commercial data, 10% of all new machinery claims were made in the first year of policy cover. This data is based on claims made between 1st June 2018 and 31st May 2023 on new machines with a seven-year policy term.¹

Over half of these claims were made in years three, four and five, demonstrating the benefits of protecting your machinery.1 Even though it may be covered with a manufacturer’s warranty, with MACH 3-5-7, your machinery will be protected for up to seven years, and premium costs will be fixed (excluding insurance premium tax increases).

Questions to ask yourself

Knowing the full risks and actual costs can help you decide whether machinery breakdown cover is right for you.

There are many things to consider. Ask yourself:

• How necessary is the machinery to the business?
• What would it cost to repair or replace it?
• How would damage or a breakdown impact my profits?
• How would I pay for repair costs or purchases?
• What warranties or guarantees do I have? Are they worthwhile?

Speaking to our team can help you make an informed decision about the best way to plan for sudden and unforeseen mechanical breakdowns and production interruptions.

Get in touch today

Whilst you might consider cover following the expiry of your machinery warranty, the premium will be significantly cheaper if you take it out when you purchase the machine as new.

And remember, there are certain events the supplier’s warranties don’t usually cover, particularly damage or operator error claims. You may unknowingly have 12 months without adequate insurance.

MACH 3-5-7 machine protection kicks in immediately so you’re covered from day one which can help you plan for unforeseen mechanical breakdowns and production interruptions.

In the event of a loss, we can offer dedicated support for your business when you need it the most.