Most business policies cover sudden, accidental, external damage. A motor that burns out, a compressor that seizes or a gearbox that fails is none of those things — it is breakdown, and it usually sits outside standard cover unless you have added it.
What Breakdown Cover Responds To
- Electrical or mechanical failure of plant and machinery.
- Damage from short circuit, arcing or overheating within the machine.
- Failure of refrigeration and air conditioning plant.
- Damage to pumps, motors, compressors, switchboards and control gear.
Cover generally pays to repair or replace the failed item, and sometimes for the resulting damage the failure causes.
What Stays Excluded
- Wear and tear and gradual deterioration — the perpetual line between insurance and maintenance.
- Items under manufacturer’s warranty or a maintenance contract.
- Consumables — belts, filters, seals, bulbs.
- Damage from lack of servicing, where the schedule was not followed.
- Overloading or use outside the machine’s rating.
The Losses That Follow the Breakdown
The repair is often the small part. A failed refrigeration unit spoils stock; a failed compressor stops production. Two extensions are worth asking about:
- Deterioration of stock, for refrigerated or temperature-sensitive goods.
- Consequential loss or business interruption following breakdown, which covers lost gross profit while the plant is down.
For transport operators, this is a close cousin of downtime cover on refrigerated vehicles, where a failed unit can spoil an entire load.
Who Should Carry It
- Workshops and depots with compressors, hoists and washbays.
- Businesses with cold storage or processing plant.
- Operators with fixed plant — crushers, screens, conveyors, pumps.
- Anyone whose revenue stops when a single machine stops.
How It Sits Alongside Other Cover
Breakdown normally attaches to a business insurance package or to a plant and equipment programme. It does not replace either — it fills the gap where the cause of loss was internal rather than external.
Practical Points Before You Buy
- Schedule the plant that matters, with values and ages.
- Check whether the policy pays new-for-old or depreciated.
- Find out the waiting period on any consequential loss section.
- Keep service records — they are what proves the exclusion does not apply.
Wear and Tear vs Sudden Failure
This is the line every breakdown claim is argued on. Insurance responds to a sudden, unforeseen failure. It does not fund the replacement of components that were always going to reach the end of their life.
In practice, assessors look at the service history. A machine maintained to the manufacturer’s schedule with records to prove it is treated as a failure; the same machine with no records for three years invites the question of whether the failure was foreseeable. Maintenance documentation is therefore not just a compliance habit — it is the evidence that keeps the exclusion off your claim.
Setting the Indemnity and Waiting Periods
Where consequential loss is added, two settings do the work:
- The waiting period — usually somewhere between 24 and 72 hours before cover starts. Set it against how long you can genuinely absorb a stoppage.
- The indemnity period — how long the policy keeps paying. For plant with long lead times on parts or replacement, twelve months can be short.
The pairing matters more than either number alone. A short waiting period on a machine that is never down for long is wasted premium; a short indemnity period on a machine with a nine-month lead time is a gap.
A Practical Way to Decide What to Schedule
- List the plant that, if it stopped tomorrow, would stop revenue.
- For each, ask how quickly a replacement could be hired or bought.
- Cost the downtime in gross profit, not turnover.
- Schedule the items where the answer is uncomfortable, and leave the rest.
Common Questions
Is breakdown the same as an extended warranty?
No. A warranty is a promise from the manufacturer about defects. Breakdown insurance responds to failure in service, subject to policy terms.
Does it cover mobile plant?
Sometimes, and often on more limited terms than fixed plant. Machines that work hard in dirty environments are underwritten carefully.
Is it worth it for one machine?
If that machine stopping stops the business, usually yes. If it can be hired in for a week without material loss, perhaps not.
Talk It Through
Request a quote or call 1300 983 940 and we will look at where a failure would actually hurt.
General advice only. This article does not take your objectives, financial situation or needs into account. Consider the relevant PDS and Target Market Determination before deciding on a policy.