Central Insurance Blog

From robotics and assembly machines to precision tools, the net stock of equipment for the U.S. manufacturing industry was a staggering $1.8 trillion in 2022. Every piece of equipment is vital in keeping manufacturing production lines moving and orders on track. 

But what happens when a critical machine breaks down? 

Beyond the immediate frustration, equipment failures can lead to production delays, financial losses, and even reputational damage.

“So much of manufacturing is automated, where computer programming runs the process,” says Eddie Dreyer, commercial lines staff underwriter at Central Insurance. “That’s still equipment, and it’s still exposed to failures. Equipment breakdown is a real concern for manufacturers.”

The good news is that with proactive planning, strong maintenance programs, and the right insurance coverage, your manufacturing operation can minimize disruption and costs when the unexpected happens. 

Read on as Dreyer provides expert guidance on some of the policies and strategies every manufacturer should consider to best financially protect its equipment assets.

Why Equipment Fails (And How to Prevent It)

Depending on maintenance and usage, manufacturing equipment can last anywhere from 10 to 30 years. But when it does fail, it happens for many reasons, including wear and tear, outdated parts, software malfunctions, or environmental damage.

For some manufacturers, these breakdowns can be catastrophic, especially when machinery is highly specialized.

“When we evaluate manufacturing, the first question we ask them is ‘what are you producing?’” Dreyer explains. “The answer to that question could significantly raise the stakes, especially in the automotive, aerospace, or military industries. In these scenarios, if equipment fails, it’s not just about repair—it can trigger lawsuits, product recalls, or lost contracts.”

Even for less complex operations like light industrial manufacturing, machine downtime leads to production stoppages, missed deadlines, and higher costs. The more niche the process, the harder and slower it can be to get things back online.

Steps to Take Before Your Equipment Fails

One of the best ways to limit losses is to prevent equipment failures before they happen. That’s why insurance providers examine preventive maintenance programs closely during underwriting.

“We’ll ask how often maintenance is done, and who’s doing it,” Dreyer explains. “Some facilities use in-house staff who know the machines inside and out. Others hire third-party service companies, and in those cases, we want to see their certificates of insurance. If something goes wrong, we may be able to subrogate back to that vendor.”

Key Takeaway: Well-run facilities typically document inspections, service schedules, and quality-control checks. These practices not only reduce breakdowns but also strengthen trust with a carrier, which can result in more favorable coverage terms.

How Equipment Fails Can Impact Your Business

Whether you manufacture tools, electrical components, or another product, you can see a ripple effect when equipment fails. Beyond the repair costs of a failure, companies can face lost production, delayed shipments, and strained customer relationships.

What’s more, for highly specialized operations, finding replacement parts—or even an entire machine—can take weeks or months.

“We look at an equipment failure as a business income and extra expense exposure,” Dreyer notes. “If a machine goes down, can they get parts in a couple of days, or will it take six months? The quicker they can repair or replace, the less of a true business income loss they face.”

Key Takeaway: Having contingency plans—such as backup machines, relationships with suppliers, or agreements with nearby facilities—can dramatically reduce the impact of a breakdown.

Should You Repair or Replace When Your Equipment Fails?

When something breaks, businesses often struggle with whether to repair or replace. Insurance can help, but owners still need to weigh the long-term implications of that decision.

Dreyer offers practical guidance: “If it’s a newer machine, it might make sense to repair it. But if it’s older and likely to have multiple issues, replacing it could be better, even if it’s more expensive. That’s a conversation to have with your local agent, and sometimes even a vendor or supplier you trust.”

Key  Takeaway: The decision should balance immediate costs, the expected lifespan of the equipment, and its role in production.

When Equipment Fails, Insurance Steps In

You don’t have to face equipment failures alone. Insurance is designed to help bridge the financial gap when covered breakdowns occur.

Dreyer explains how coverage may typically apply. “A lot of insurance companies provide equipment breakdown coverage as part of their property enhancements. At Central, we provide it in conjunction with our Premier Plus package. If it’s a covered loss—like a mechanical or electrical breakdown—insurance can step in to compensate for repair or replacement of the equipment and cover related expenses as outlined in the policy.”

Adequate insurance protection can include repair costs, replacement of damaged equipment if it’s non-restorable and a covered loss, and even extra expenses like leasing or renting a temporary machine to keep production moving. That means policyholders can gain repair and replacement protection and peace of mind that their operations are safeguarded.

Dreyer also stresses the importance of communicating with your agent when something goes wrong. “The first thing a business should do when their equipment fails is let their agent know immediately,” he explains. “Then you can talk through it together, figure out if it’s a covered loss, and decide the next steps. The sooner that conversation happens, the faster we can get the right resources in place to help minimize the downtime.”

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Developing a Response Plan for When Your Equipment Fails

Even with coverage in place, savvy manufacturers prepare for equipment failures with detailed response plans. Dreyer recommends walking through your facility and asking these questions:

• What’s our plan if a key machine fails?
• Do we have backup equipment or suppliers?
• How quickly can we get replacement parts or service?
• Who steps in if specialized employees are unavailable?

“Essentially, manufacturing facility owners or plant managers should ask, ‘If this machine went down, what would we do?’ Whether the answer is running another shift, renting a facility, or sourcing materials elsewhere, the goal is to minimize downtime and limit losses.” – Eddie Dreyer, Commercial Lines Staff Underwriter at Central Insurance

Keep in Mind: Proactive planning not only reduces business interruption—it also shows your carrier that your company is serious about risk management, which can help with underwriting and keep future premiums down.

Work with a Trusted Partner Like Central

At the end of the day, equipment failures are part of doing business in manufacturing. From equipment breakdown coverage to business income protection, top insurance carriers like Central deliver responsive solutions and trusted guidance to keep production moving, even when the unexpected happens.

What sets Central apart is more than just our robust coverage options for manufacturers; it is how we deliver on our promise. 

Our customers consistently praise our fast, reliable claims service, with adjusters often on-site within 24 hours and claims processed quickly so you can get back to business without delay. Just as important is our compassionate, person-to-person support. We know that equipment failures and downtime are stressful, which is why our team works to provide reassurance, clarity, and care throughout the process.

With Central Insurance, you don’t just get a policy, you gain a responsive, knowledgeable partner committed to protecting your business and helping it thrive, even when unexpected equipment failures occur.

Contact your local independent Central agent for more details about how to protect your manufacturing facility or for an insurance quote.