One Loss, Two Deductibles: Equipment Breakdown or Homeowners Loss?

• By: The Big "I" Virtual University
• April 24, 2026

A homeowner with an HO3 policy has a $2,500 deductible. Their policy includes an equipment breakdown endorsement—form 16016—with a separate $500 deductible.

The insured had a loss where the HVAC system’s condensate pump failed due to a mechanical breakdown. The failure caused the drain pan to overflow into the two floors below. The form appears to indicate the condensate pump and the resulting water damage, as a result of the equipment breakdown, should be covered under the equipment breakdown endorsement.

Q: However, the insurance company indicates the water damage is paid separately with a $2,500 deductible and the condensate pump is paid subject to a $500. Is this correct?

Response 1: I agree with the carrier. I assume the policy includes ISO coverage form HO 00 03 03 22 – Homeowners 3 – Special Form.

In Section I – Conditions, that form states: 

B. Deductible

Unless otherwise noted in this Policy, the following deductible provision applies:

With respect to any one loss:

1. 1. 1. 1. 1. 1. 1. Subject to the applicable limit of liability, we will pay only that part of the total of all loss payable that exceeds the deductible amount shown in the Declarations.
                  2. If two or more deductibles under this Policy apply to the loss, only the highest deductible amount will apply.

If the declarations show a $500 deductible for equipment breakdown and a $2,500 deductible for all other causes of loss, the $2,500 deductible applies to a single loss.

In addition, note this provision in the endorsement:

SECTION I – PERILS INSURED AGAINST

3. The following provision is added.

We insure against direct physical loss or damage to covered property on the residence premises that is caused by an “equipment breakdown”. The Equipment Breakdown Coverage Limit shown in the Declarations is the most we pay for any one loss, regardless of the number of “equipment breakdowns”.

This coverage does not apply to property that is separately described and specifically insured by this policy.

Section I – Property Coverages provides Coverage A – Dwelling, Coverage B – Other Structures, and Coverage C – Personal Property. Since these types of property and coverages are specifically described and provided by the policy, they are not covered by the equipment breakdown endorsement.

The only types of property covered by the endorsement are those specifically named in the definition of equipment breakdown, such as boilers, fired/unfired pressure vessels, vacuum vessels, pressure piping, and mechanical, electrical, electronic, or fiber-optic equipment. Unless these types of property were damaged when water seeped onto the lower floors, this endorsement provides no coverage for damage to those floors. Accordingly, the higher deductible applies to that damage.

This question was originally submitted by an agent through the Big “I” Virtual University’s (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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