Homeowners, Are Your Appliances and Systems Protected?

Your home is your sanctuary, a place to recharge. But you need many appliances working hard to preserve that haven. When they break down, it’s chaos.

And it's not just the things in your home you need to worry about. If a severe storm knocks out your power, the electrical surge can cause significant damage to your equipment. Even a brownout can cause your home appliances to short-circuit.

Appliances aren’t cheap. And the smarter they get, the more expensive they are. Many have sensitive onboard computers that are costly to repair and even more costly to replace. Your home insurance policy might provide for some mechanical failure, but there’s a good chance the coverage is minimal.

The takeaway on equipment breakdown insurance

• It’s not a home warranty.
• You can add equipment breakdown insurance to your homeowners policy for less than $100 per year. Most policies offer $10,000 to $50,000 in coverage, but you can go higher if needed.
• Equipment breakdown coverage responds only when damage is due to a hazard (also known as a "peril") listed on your home insurance policy. If the damage is due to a peril not listed on your home insurance policy, like a flood or an earthquake, equipment breakdown won’t cover it.
• Landlords should consider equipment breakdown coverage as part of their risk management strategy to minimize lost rental income.
• Equipment breakdown doesn’t cover normal wear and tear, lack of maintenance or failure due to age. Consider a home warranty if you want coverage for aging appliances and equipment.

Despite sounding similar, a home warranty and an equipment breakdown endorsement cover different things.

A home warranty stand-alone policy

A home warranty is a stand-alone policy that's separate from your home insurance. Home warranties cover wear and tear and other damage to home equipment. Most home warranties don’t require a catastrophic event to trigger coverage. As the name implies, a home warranty responds when machines or equipment fail, regardless of why. Aging appliances might be a reason to buy a home warranty, but be clear on what it covers and the cost to you each time the equipment breaks down.

For example, say you buy a home warranty to protect an aging water heater. Soon after, the water heater breaks down. You notify the home warranty service and they dispatch a repair person to your home. They charge you $100 for the house call, per the warranty agreement. Each time a repair person is dispatched, you pay a fee. (The home warranty policy requires them to repair the water heater until it’s deemed unrepairable.) The process takes multiple breakdowns and repairs. After several service calls, they replace the water heater with an equivalent model.

Home warranties vary, so you’ll need to read the fine print. Some home warranties:

• Exclude coverage for older appliances
• Have strict procedures for reporting breakdowns (These will exclude coverage if you don’t follow them.)
• Limit repairs to professionals in their network
• Set minimum deductibles, or out-of-pocket fees, for each repair call (These are in addition to your warranty’s annual premium.)
• Are more expensive than equipment breakdown insurance (A home warranty averages $500 per year.)

You’ll need to do the math on whether a home warranty makes sense for your situation. If you’ve got a mix of old and new home equipment, you could mix it up and layer a home warranty with an equipment breakdown add-on.

An equipment breakdown add-on for homeowners insurance

Home insurance covers damage to your appliances, equipment and belongings caused by a peril listed in your policy (fires, lightning, power surges, theft, etc.). Most equipment breakdown coverage includes damage caused by:

• Aircraft, cars and vehicles
• Explosions
• Falling objects
• Fires and smoke
• Hail
• Lightning strikes
• Power surges (after a covered power outage)
• Theft
• Vandalism and malicious mischief
• Water
• The weight of ice, snow and sleet
• Windstorms

When you add equipment breakdown coverage to your home insurance, your home equipment and appliances are covered as long as the mechanical or electrical failure is due to a covered peril, like the ones listed above. Unlike a home warranty, equipment breakdown coverage typically lets you choose your repair person. It can help with the cost to repair or replace systems and devices like:

• Chair lifts and elevators
• Electrical panels
• Electrical systems
• HVAC systems
• Heat pumps
• Home electronics
• Home security systems
• Home monitoring systems
• Personal computers
• Refrigerators and freezers
• Riding lawnmowers and garden tractors
• Solar panels
• Stoves and ovens
• Sump pumps
• Swimming pool equipment
• Washers and dryers
• Water heaters
• Water purification or reverse osmosis systems
• Well pumps
• Whole-house humidifiers
• Other appliances (Check your policy language for coverage.)

In addition to repair and replacement charges, equipment breakdown insurance helps with these extras.

• Food and beverage spoilage: Reimburses your cost to replace food and beverages spoiled by the equipment breakdown (within specific limits).
• Expediting expenses coverage: Helps with the added expenditure to expedite a speedy replacement or repair.
• Additional living expenses: Reimburses your out-of-pocket cost when staying in a hotel because your home is unlivable. For example, if your air conditioner breaks down on a scorching day, you’ll need to relocate until it’s repaired.
• Green coverage: Replaces damaged equipment with energy-efficient alternatives.

Ask your agent about the exclusions on the types of equipment and mechanical failures covered, since they vary by policy.

Equipment and appliances are expensive

The cost to add equipment breakdown to your home insurance is usually less than $100 per year. This is fairly low when you compare it to the out-of-pocket cost of some home appliances:

If you have even a few luxury brand appliances in your home or condo, the price to repair or replace them can quickly shoot well into the thousands.

Call us

Nothing says pandemonium like a power surge or extreme weather! Protect your budget and the things that keep your home operational and comfortable. Call us, and we'll figure out if it makes sense for you to add equipment breakdown coverage to your homeowners or condo insurance policy.