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Winter 2018  Volume 14, Number 4        

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What Do You Mean That's Not Covered?

Just because something is in your home doesn't necessarily mean it's covered by your homeowners policy.

You may be surprised to learn that a typical homeowners policy does not cover losses resulting from the failure of many of the mechanical and electrical systems in your house, such as:

  • Heating, ventilation, and air conditioning (HVAC)
  • Electrical systems
  • Hot water heating/wells/water filtration
  • Green systems, including solar, geothermal, heat pumps, hybrid fuel boilers, and home batteries
  • Kitchen and laundry appliances
  • Generators
  • Pool pumps and related systems
  • Networked/smart/connected home systems and their related equipment

Equipment Breakdown Coverage

In general, Equipment Breakdown insurance coverage is probably a better option. You can usually just add it to your homeowners policy, too. In addition to covering the system itself, you also get several additional coverages, including additional living expenses; spoilage; expediting costs, and replacement cost loss settlement provisions

What Is Covered?

The broad form Equipment Breakdown endorsement defines "Covered home equipment" as follows:

  1. "Covered home equipment" means property covered under Coverage A—Dwelling, Coverage B—;Other Structures or Coverage C—Personal Property:
    1. That generates, transmits or utilizes energy; or
    2. Which, during normal usage, operates under vacuum or pressure, other than the weight of its contents.

"Covered home equipment" may utilize conventional design and technology or new or newly commercialized design and technology.

Although the language is broad, it does exclude items for which other more specific insurance is appropriate:

  • The structure/enclosure the item is built in (i.e., the house)
  • The domestic water lines, except for those attached to a boiler
  • Septic tanks and leaching fields
  • Fire protection systems
  • Data
  • Riding lawn tractors/mowers

Here are a few types of home systems that typically fall under this coverage.

  • Gas-fired furnace. It uses electricity and natural or liquid propane gas and operates with pressurized gases (covered equipment).
  • Hot water heater. It uses electricity (covered equipment).
  • Solar panels. In converting light to power, the system transmits electricity (covered equipment).
  • Well pump motor. It uses electricity to spin (covered equipment).
  • Central air-conditioning. The entire system uses both electricity and pressurized refrigerant (covered equipment).
  • Central vacuum system. It operates under a vacuum (covered equipment).

What Kind of Losses Are Covered?

The interesting thing about broad form Equipment Breakdown coverage is that the usual and customary exclusions for wear and tear and mechanical breakdown are generally eliminated by the following:

We will pay for direct physical damage to "covered home equipment" that is the result of a "home system breakdown" that occurs on or off the "residence premises."

A "home system breakdown" is broadly defined as direct physical damage to covered home equipment from sudden and accidental

  • mechanical breakdown;
  • electrical breakdown; or
  • bursting, cracking, or splitting

that requires repair or replacement of all or part of the damaged covered home equipment. Basic exclusions within the endorsement include:

  1. Rust, corrosion, erosion, deterioration or gradual loss of efficiency or functionality of "covered home equipment";
  2. Leakage or seepage at or from any connection, valve, fitting, shaft, or seal;
  3. Any programming error, programming limitation, computer virus, malicious code, loss of data, loss of access, loss of use, loss of functionality or other condition within or involving data or media of any kind;
  4. Complete or partial interruption of electrical power, fuel or water supply, whether deliberate or accidental;
  5. Any condition which can be corrected by resetting, recalibrating, or by the performance of maintenance; or
  6. Cosmetic or other damage that does not impair functionality.

To learn more about the Equipment Breakdown coverage and how to add it to your homeowners policy, please contact us.

[Our thanks to IRMI for background on this article.]

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In this issue:

This Just In...

What Do You Mean That's Not Covered?

What Happens if I have a Homeowners Claim?

Insuring Motorcycles…and their Drivers

Alternatives to Insurance for Home Electrical and Mechanical Systems Losses



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