By Richard McGrath, CIC, LIA
Homes today have become more advanced. As a result, homeowner’s insurance has developed new enhancements that offer additional protection for insureds, such as systems breakdown coverage and service line coverage.
Coverage for mechanical breakdowns in your home systems is typically excluded on a homeowner’s policy. Warranties and service contracts offer some protection, but what will happen when the warranty expires or if there are certain exclusions on the service contract? With systems breakdown coverage, all equipment is covered, regardless of its age.
As technology has advanced, home electrical circuitry has become more sophisticated, but also more sensitive. Today’s home may include home security monitoring and control devices, central air conditioning, solar water heaters, radiant flooring, water purification and filtration systems, pool and spa pumps, chair lifts and even elevators. You may also have a home entertainment system, climate controls, data lines and medical instrumentation.
Such systems may be vulnerable to damage caused by electrical surges, mice or other pests, weather or fire. They may overheat, wear out or become damaged because of faulty wiring or some other malfunction.
In addition, you may have underground water, sewer and electrical lines. Such lines are susceptible to damage from tree roots, freezing or shifts in the land around them. They may also break down as they age.
When damage takes place, it typically costs thousands of dollars to repair. Think about the cost if you have to replace a boiler or furnace, a heat pump, a well pump, a water heater, renewable heating, an installed sump pump, an electrical service panel or a permanent emergency generator.
Systems breakdown insurance, also called mechanical breakdown or equipment breakdown insurance, covers the repair or replacement of covered systems, and the repair of related damages, typically up to $50,000 with a $1,000 deductible.
Service line coverage, which is usually part of the same endorsement, typically covers up to $10,000 in repairs (with a $500 deductible) to underground lines (excluding gas lines), in addition to repairs to damage caused to the property, such as repairs to landscaping, driveways, lawns and walkways.
The following are a few examples of repairs that typically are covered:
- A circuit breaker fails, leading to damage of the home’s appliances and electrical system, including wiring, switches and outlets.
- An underground sewer line is damaged by a tree root. In repairing the line, the driveway and adjacent landscaping are damaged.
- The compressor on a central air conditioning unit overheats, leading to an electrical breakdown.
- A heat pump is damaged, but replacement parts are no longer available because of its age, so the unit must be replaced.
- The water control valve on a hot water heating system fails, causing water to escape and damage the home.
- An installed home generator runs low of coolant, causing the block plugs and head gaskets on the diesel engine to fail.
These examples are based on real-life experiences. In each case, the cost of damages totaled thousands of dollars.
In comparison, systems breakdown coverage is relatively inexpensive. It may also include online energy efficiency assistance that can save you money – perhaps even enough to cover the cost of the systems breakdown insurance.
Before purchasing coverage, ask your insurance agent to review your homeowner’s policy and to make a recommendation, based on any gaps in your coverage. While this is a new area of coverage, a number of carriers are offering systems breakdown coverage, so a trusted independent agent will be able to provide you with a competitive quote.
Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass. He can be reached at firstname.lastname@example.org.
This article is written for informational purposes only and should not be construed as providing legal advice.