Equipment Breakdown 101

Residential equipment breakdowns can be a homeowner’s worst nightmare—and not just because of the service interruption. When the furnace or central air conditioning goes kaput or the sewer line to the street ruptures, the price tag for replacements and repairs is eye-opening.

If a homeowner has equipment breakdown insurance, the insurance company helps pick up the costs. Yet many homeowners are unaware that such insurance exists—or they mistakenly believe their homeowners insurance policy will cover the loss.

A recent survey conducted by Independent Agent on behalf of Hartford Steam Boiler (HSB) found that 41% of agents cited “lack of awareness” as the reason why customers don’t purchase coverage to repair or replace home systems or equipment that breaks down. Another 30% of agents chalked it up to concerns that filing an equipment breakdown claim would affect homeowners insurance premiums or coverage eligibility. These misunderstandings are unfortunate given the low cost of equipment breakdown insurance.

The survey also asked agents whether adding equipment breakdown coverage to their product offerings would give them a competitive edge—and a resounding 70% of agents said yes. “Obviously, there is a disconnect between what agents perceive as an opportunity and homeowners’ lack of awareness of their need for equipment replacement and repair insurance,” says Jeremy Coffman, vice president, personal lines marketing at HSB.

As a home ages, the potential for breakdown of equipment and underground utility lines increases. Consider a sewer line connecting a house to a street—trees planted around the same time the pipes were laid mature to the point where their roots weaken, crack and invade the pipe.

The cost of replacement and installation could run more than $5,000, according to online estimates—and that doesn’t even include the cost of repairing landscaping that sustains damage during pipe repairs. “Many homeowners don’t realize their susceptibility to a sewer line breakdown until a neighbor experiences it first,” Coffman points out.

And many don’t know that the local utility does not bear the replacement expense. “That’s when the homeowner turns to their insurance agent to inquire if their homeowners insurance policy absorbs the cost, only to learn this is not the case,” Coffman explains.

It’s not just aging homes that are vulnerable to an equipment breakdown. Today’s smart homes are an ecosystem of connected equipment. Smart security, water and lighting systems—in addition to smart thermostats, water heaters, refrigerators, and even home medical equipment—are also at risk of breakdowns. “The electronic components inside these internet-connected devices are vulnerable to high-voltage jolts that can instantly damage the transistors on a microchip,” Coffman notes.

Traditional homeowners insurance does not cover replacing equipment because of impaired electronic circuitry. Equipment breakdown insurance, however, can absorb these costs, depending on the insurance company. “This important insurance coverage is a great tool for agents to write new business, a door opener to homeowners who are unaware of their home’s equipment risk exposures and the breakdown costs they would shoulder,” Coffman says.

Many agents find equipment breakdown and service line coverage to be a great way to further cultivate a relationship with current policyholders—a touchpoint for discussing any changes in the house that may alter their risk profile. In doing so, independent agents can review the customer’s other insurance policies and risk exposures to build their business—all while cross-selling equipment breakdown coverage.

Ask your carriers to include HSB Home Systems Protection and Service Line coverages in their homeowners package.