Covered Equipment – Definition and Importance
In plain language: Covered equipment refers to the types of items or machinery that are included in an insurance policy for protection against specific risks, such as damage, loss, or theft.
Technical definition: Covered equipment usually defines the types of machinery, apparatus, or appliances eligible for coverage under an equipment breakdown policy. This term is often found in the declarations page or in the policy definitions and it may include specific types of equipment like computer systems, heavy machinery, HVAC systems, or production equipment.
Every policyholder wants to be sure their business-critical machines are protected. Knowing what is included in your ‘covered equipment’ provides you with peace of mind.
TL;DR
- Covered equipment is the machinery or electronic devices included in your insurance policy.
- It’s important for day-to-day agency work, as the policyholder wants assurance that their machinery is being protected.
- A common pitfall is policyholders not reviewing their covered equipment list regularly.
- Quick-win for agencies is to keep their clients updated and informed about what’s covered in their insurance policy.
What Is Covered Equipment in Insurance?
In the world of insurance, covered equipment signifies various types of machinery and equipment that an insurance policy covers against certain specified risks. It features prominently in equipment breakdown policies, which cover the sudden and accidental, physical damage to equipment that necessitates its repair or replacement.
Even industrial cybersecurity policies or electronic equipment insurance often use this term. Covered equipment isn’t just limited to traditional heavy machinery; it can extend to several technological devices, like HVAC systems, computer systems, refrigeration units, elevator motors, and even certain types of medical equipment like durable medical equipment (dme).
This coverage can be essential for various industry sectors such as manufacturing, IT, healthcare, food processing, and more. A clear understanding of what specific items fall under the category of covered equipment in a policy can spare agencies and policyholders from unwelcome surprises at the time of claims.
Key Related Terms to Know
- Durable Medical Equipment – Medical apparatus that can withstand repeated use, primarily used in a patient’s home for medical reasons.
- Equipment Breakdown Insurance – Coverage that provides protection against the sudden and accidental, physical damage of machines or equipment.
- Declarations Page – Page in an insurance policy that provides an overview of the coverage.
- Endorsements – Modifications to the original insurance policy.
- Exclusions – Items or conditions that are not covered by the policy.
Common Questions About Covered Equipment
Can Certified Equipment Fall Under the ‘Covered Equipment’ Category?
Yes, authorized equipment does fit into this category. As an example, FCC equipment authorization can come into play, highlighting that the equipment has passed the necessary processes and complies with the required equipment authorization rules. Authorization, however, doesn’t guarantee inclusion in the covered equipment list. This often varies with the specific policy details.
When Does the ‘Covered Equipment’ Definition Become Vital?
Knowing what counts as covered equipment is crucial when assessing a client’s coverage needs, especially if they use specialized or expensive equipment. Coverage can also be significant for dme suppliers in the healthcare space, where equipment authorization applications are common.
What Do ‘National Security Concerns’ Have to Do with Covered Equipment?
Security concerns can impact whether certain equipment types will be included in coverage. The FCC covered list, for instance, presents equipment not allowed for procurement due to national security concerns. These devices won’t fall under the ‘covered equipment’ definition.
Covered Equipment vs. Equipment Breakdown Coverage
Understanding the distinction between ‘covered equipment’ and ‘equipment breakdown coverage’ is crucial.
Comparison Area | Covered Equipment | Equipment Breakdown Coverage
|
Primary use case | Defines the type of equipment covered in a policy | Insures equipment against breakdowns |
Coverage / concept type | Specific to equipment type | Provides monetary relief for broken equipment |
Typical exclusions | Items not listed in the policy | Specific causes of breakdowns like wear and tear or corrosion |
Who is most affected by errors | Policyholders who own high-value equipment | Every business owner with insured machinery |
Common mistakes | Not regularly reviewing and updating the list | Not understanding the in-depth exclusions |
Real Claim Examples Involving Covered Equipment
Scenario 1: A manufacturing firm made a claim when their high-end machinery broke out of nowhere. Unfortunately, they hadn’t updated their policy when they bought the equipment, so it wasn’t part of their covered equipment, and the claim was declined.
Scenario 2: A hospital’s DME was damaged in a fire. Having the DME listed under their covered equipment, they managed to have the cost of replacement covered by their insurance policy.
Scenario 3: A company had purchased foreign-made UAVs for surveillance of their property. A national security determination resulted in the UAVs being added to the FCC exclusion list. When one of the drones crashed, their claim was declined since the drone was no longer part of their covered equipment.
Limitations and Common Mistakes
- Covered equipment does not include items that haven’t been explicitly listed in the policy.
- It’s easy for policyholders to forget to update their covered equipment list when they procure new machinery.
- Failing to keep policyholders in the loop about changes, such as equipment authorization revocation, could create E&O exposure.
How to Explain Covered Equipment to Clients
Our client-facing scripts make this heavy topic more accessible:
Dme Supplier “Think of covered equipment like the items in your home that you’d want to replace if it got damaged. In your business, these are your essential pieces of durable medical equipment listed under your insurance policy.”
Small Business Owner “You know how a car insurance policy only covers specific vehicles? Similarly, your business policy only covers certain equipment—your ‘covered equipment’. If it’s not listed, it’s not covered.”
CFO or Risk Manager “Imagine your insurance policy as a shield—it only protects what’s under it. The ‘covered equipment’ are the tools and machinery that this shield covers. Any additions must be reported to ensure they don’t miss out on this protection.”