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Monday, 12 June 2017 10:34

Machinery Breakdown – Insure or not?

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The advent of machines brought on the Industrial Revolution and created the modern economical landscape. Today, it is virtually impossible to think of doing business without involving machinery of some kind. They are the real workhorses and allow for greater productivity and higher profits.

However, machines present a unique challenge to both Insured and Insurers, with the brokers being the balancing act between the two parties. In order to discuss this cover, we need to review the nature of machines.

When you purchase a machine, it is inherent in the transaction that the machine or at least some of it’s parts, will wear over time and require replacing or repairs in order for the machine to continue its intended function. A sensitive machine will have a shorter lifespan than a more robust machine; for example a photocopier versus a Lister engine. In addition to the construction and parts of the machine, the output required from the machine must also be taken into consideration. Consider the above example; the photocopier could conceivably have a higher required output than that of the Lister engine. The graph below graphically compares these machines.

machineclaimvaluetime1

The angle of the graph is subject to the quality of the maintenance that will be done on the machine; little or no maintenance will reduce the lifespan of the machine.

As shown in the diagram above, Machinery Breakdown covers only insure/protect/pay for the value or output which remains for the machine's lifespan after the breakdown of the machine. This is because the insured has used up a portion of the machines lifespan/time up to the point of breakdown. The red shaded area indicated the remaining lifespan of the photocopier, the blue shaded area the remaining lifespan for the Lister engine.

The graph clearly show that a conscious decision needs to be made by the insured to insure a machine once it is nearing it’s useful life span. Factors to consider :

  1. The quality and quantity of maintenance effected by the insured during the life of the machine
  2. The value or output of the useful lifespan left versus the premium and excess costs

We hope this review of machinery breakdown has explained the insurance principle clearly, but should you require more insight or have specific questions, please feel free to leave them in the comments below or to contact Quanta Insurance directly.

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At Quanta we care about you and ensuring you have all you need to be adequately insured and able to mange your risks effectively.
Feel free to join our mailing lists to receive our monthly Quanta newsletter with updates, news, events, new product info, promotions, blog updates and much more.
You may unsubscribe at any time via the link at the bottom of emails received or on our website.
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