Equipment Breakdown Coverage: Is It Worth It for Your Home?
Equipment breakdown insurance protects expensive home systems like HVAC, heat pumps, solar panels, and major appliances from sudden mechanical or electrical failures. Learn what it covers, what it costs, and whether you need it.
Quick Answer
Equipment breakdown coverage costs $25-75/year and covers sudden mechanical/electrical failures of expensive home systems like HVAC, heat pumps, solar panels, and appliances. It's worth it if you have equipment worth $5,000+, systems nearing the end of warranties, or expensive-to-repair items like geothermal heat pumps or solar installations. Unlike home warranties, it pays replacement value and has no service call fees.
When your $15,000 heat pump suddenly fails due to a power surge, or your $25,000 solar panel system's inverter shorts out, standard homeowners insurance won't cover it. Equipment breakdown coverage fills this gap.
This guide explains exactly what equipment breakdown insurance covers, how much it costs, and whether it makes financial sense for your home's systems. I'll compare it to home warranties, show you real claim examples, and help you decide if you need it.
HVAC Equipment Coverage
$300-600/year • Up to $5,000-20,000 coverage
Breakdown coverage, extended warranty, and repair protection.
Get Coverage Options →What Is Equipment Breakdown Coverage?
Equipment breakdown coverage (also called "equipment breakdown insurance" or "mechanical breakdown coverage") is an add-on to homeowners insurance that covers sudden mechanical or electrical failures of home systems and appliances.
Key difference from standard homeowners insurance: Your regular policy covers damage from fires, storms, and theft. Equipment breakdown coverage specifically protects against internal failures - motors burning out, electrical shorts, mechanical breakdowns, and operator errors.
What Equipment Breakdown Coverage Typically Includes
Heating & Cooling
- Central air conditioning systems
- Heat pumps (air source & geothermal)
- Furnaces and boilers
- Mini-split systems
- Water heaters
Renewable Energy
- Solar panel systems
- Solar inverters
- Home battery storage
- EV charging equipment
- Geothermal systems
Major Appliances
- Refrigerators
- Washers and dryers
- Dishwashers
- Ranges and ovens
- Built-in microwaves
Other Systems
- Well pumps
- Sump pumps
- Pool equipment
- Home elevators
- Security systems
How Equipment Breakdown Coverage Works
Here's the typical claims process:
Equipment Fails
Your covered equipment suddenly breaks down due to mechanical or electrical failure. For example: heat pump compressor fails, solar inverter shorts out, or refrigerator motor burns out.
File Claim with Insurance
Contact your insurance company (not a warranty service center). They'll send an adjuster to assess the damage and determine if it's covered.
Choose Your Contractor
Unlike warranties, YOU choose the repair company. Get quotes from qualified contractors. No pre-approved service network required.
Insurance Pays Claim
After paying your homeowners insurance deductible (typically $500-2,500), insurance covers the repair or replacement cost up to policy limits.
Why This Is Better Than Home Warranties
- ✓No service call fees: Home warranties charge $75-125 per visit. Equipment breakdown coverage uses your regular insurance deductible.
- ✓Choose your contractor: Use the best HVAC company, not whoever the warranty assigns.
- ✓Replacement value: Get the actual cost to replace, not a depreciated payout.
- ✓No claim disputes: Insurance adjusters assess claims objectively. Warranties often look for reasons to deny.
What Equipment Breakdown Insurance Covers (and Doesn't Cover)
| Covered | Not Covered |
|---|---|
| ✓ Sudden mechanical failure (motor burnout, compressor failure) | ✗ Normal wear and tear |
| ✓ Electrical failure (power surges, short circuits) | ✗ Lack of maintenance |
| ✓ Operator error damage | ✗ Intentional damage |
| ✓ Steam pressure explosion | ✗ Cosmetic damage |
| ✓ Artificially generated electricity (power surge damage) | ✗ Equipment over 20 years old (varies by insurer) |
| ✓ Centrifugal force damage (rotating parts failing) | ✗ Weather damage (covered by standard policy) |
Real example: Your 5-year-old heat pump's compressor fails in July. Repair cost: $3,500. You pay your $1,000 homeowners deductible, insurance covers the remaining $2,500. If you didn't have equipment breakdown coverage, you'd pay the full $3,500.
How Much Does Equipment Breakdown Coverage Cost?
Typical cost: $25-75 per year added to your homeowners insurance premium.
| Home Value | Annual Premium | Coverage Limit | Monthly Cost |
|---|---|---|---|
| $200,000 - $300,000 | $25 - $40 | $25,000 - $50,000 | $2 - $3 |
| $300,000 - $500,000 | $40 - $60 | $50,000 - $100,000 | $3 - $5 |
| $500,000+ | $60 - $75 | $100,000+ | $5 - $6 |
Compare to home warranties: Home warranties cost $400-800/year PLUS $75-125 per service call. Equipment breakdown coverage is significantly cheaper if you only have 1-2 claims over several years.
Equipment Breakdown Coverage vs. Home Warranty: Which Is Better?
| Feature | Equipment Breakdown Coverage | Home Warranty |
|---|---|---|
| Annual Cost | $25-75/year | $400-800/year |
| Per-Claim Fee | Insurance deductible ($500-2,500, once per event) | $75-125 per visit |
| Choose Contractor? | Yes - any licensed contractor | No - must use warranty network |
| Coverage Type | Sudden failures only | Wear and tear + failures |
| Payout Method | Replacement value | Depreciated value or cheapest repair |
| Claims Process | Like insurance (straightforward) | Often disputed, slow |
| Solar Panels | Usually covered | Rarely covered |
| Best For | High-value single systems ($5,000+) | Multiple aging appliances |
Bottom line:
- Choose equipment breakdown coverage if: You have expensive systems (heat pump, solar, geothermal), want contractor choice, and prefer insurance-style claims.
- Choose home warranty if: You have many aging appliances (10+ years old), want coverage for wear and tear, and don't mind service call fees.
- Get both if: You have expensive renewable energy systems AND aging appliances. The costs don't overlap.
Is Equipment Breakdown Coverage Worth It?
Run this simple calculation:
Worth It Calculator
Step 1: Add up the replacement cost of your covered equipment
Solar system: $25,000
Water heater: $2,000
Total value at risk: $39,000
Step 2: Calculate break-even point
Insurance deductible: $1,000
One major failure = saves $11,000 to $38,000
Break-even: 1 claim every 20 years
Verdict: If your equipment has even a 5% chance of major failure in the next 20 years, equipment breakdown coverage is worth it.
You Should Get Equipment Breakdown Coverage If:
Inverters cost $3,000-8,000 to replace. Standard homeowners insurance won't cover electrical failures.
Heat pumps cost $8,000-20,000. Geothermal systems cost $20,000-40,000. Power surges and mechanical failures are common.
Once the 5-10 year warranty expires, you're on your own for repairs. Equipment breakdown coverage becomes your new safety net.
Lightning strikes and power grid issues can fry expensive equipment. Equipment breakdown coverage protects against electrical failures.
If a major system failure would strain your budget, the $25-75/year premium is cheap insurance.
You Can Skip It If:
Wait until warranties expire before adding equipment breakdown coverage.
Self-insuring makes sense if you can easily cover any repair.
Some insurers won't cover equipment over 20 years old. Check with your provider.
Your landlord is responsible for major systems. Renters insurance has different coverage.
Protect Your Solar Investment
$150-400/year • Up to $15,000-50,000 coverage
Equipment damage, theft, roof leaks, and production guarantees.
Get Coverage Options →Real Equipment Breakdown Coverage Claims Examples
Heat Pump Compressor Failure
Situation:
3-year-old heat pump's compressor failed during heat wave. Out of manufacturer warranty.
Claim Details:
Repair cost: $4,200
Insurance deductible: $1,000
Insurance paid: $3,200
Result: Homeowner saved $3,200. Over 10 years of paying $50/year premiums, they'd spend $500 - still saved $2,700.
Solar Inverter Short Circuit
Situation:
Power surge damaged $7,000 solar inverter. Manufacturer warranty didn't cover electrical damage.
Claim Details:
Replacement cost: $7,000
Insurance deductible: $1,500
Insurance paid: $5,500
Result: Without equipment breakdown coverage, homeowner would have paid $7,000 out of pocket. Total savings: $5,500.
Geothermal Heat Pump Loop Failure
Situation:
Ground loop developed leak in 8-year-old geothermal system. Needed excavation and loop replacement.
Claim Details:
Repair cost: $15,000
Insurance deductible: $2,500
Insurance paid: $12,500
Result: This single claim justified 160+ years of equipment breakdown coverage premiums ($75/year).
How to Add Equipment Breakdown Coverage
Step 1: Check If You Already Have It
Some homeowners insurance policies include equipment breakdown coverage automatically. Review your policy or call your agent to ask:
- "Do I have equipment breakdown coverage or mechanical breakdown insurance?"
- "What's my coverage limit for equipment breakdown?"
- "Which types of equipment are covered?"
Step 2: Request a Quote
Contact your current insurance company first. Adding to your existing policy is usually easiest and cheapest. Ask:
- "How much does equipment breakdown coverage cost to add to my policy?"
- "What's the coverage limit and deductible?"
- "Are solar panels, heat pumps, and EV chargers covered?"
Step 3: Compare Multiple Insurers
Major insurers offering equipment breakdown coverage:
- State Farm (Equipment Breakdown Protection)
- Allstate (Equipment Breakdown Coverage)
- Nationwide (Equipment Breakdown)
- Liberty Mutual (Equipment Breakdown)
- Travelers (Equipment Breakdown)
- USAA (Equipment Breakdown Coverage)
- Farmers (Equipment Breakdown)
- American Family (Equipment Breakdown)
Step 4: Review Coverage Limits
Make sure your coverage limit exceeds your most expensive equipment:
| Equipment | Typical Replacement Cost | Recommended Limit |
|---|---|---|
| Solar + Battery | $30,000 - $50,000 | $50,000+ |
| Geothermal System | $20,000 - $40,000 | $50,000+ |
| Heat Pump | $8,000 - $20,000 | $25,000+ |
| Standard HVAC | $5,000 - $12,000 | $25,000+ |
Frequently Asked Questions
Does equipment breakdown coverage cover my HVAC system?
Yes, equipment breakdown coverage typically covers central air conditioning, heat pumps, furnaces, boilers, and mini-split systems. However, it only covers sudden mechanical or electrical failures - not normal wear and tear or lack of maintenance. If your HVAC system is properly maintained and fails due to a compressor burnout, motor failure, or electrical short, you're covered.
Are solar panels covered under equipment breakdown insurance?
Most equipment breakdown policies cover solar panel systems, including panels, inverters, and monitoring equipment. This is especially valuable because standard homeowners insurance typically excludes electrical or mechanical failures. If your inverter fails or a power surge damages your system, equipment breakdown coverage will pay for repairs. Always confirm with your insurer that solar equipment is explicitly covered.
What's the difference between equipment breakdown coverage and a manufacturer warranty?
Manufacturer warranties are free and cover defects in materials or workmanship for a specific period (typically 5-10 years). Equipment breakdown coverage is paid insurance that covers sudden failures after the warranty expires or failures not covered by warranty (like power surges or operator error). Think of equipment breakdown coverage as your backup once manufacturer warranties expire.
How long does an equipment breakdown claim take?
Equipment breakdown claims are processed like standard insurance claims. After you report the failure, an adjuster will assess the damage within 2-5 business days. Once approved, you can hire your contractor and begin repairs immediately. The insurance company typically pays within 7-14 days of receiving the repair invoice. This is much faster than home warranty claims, which can take weeks.
Can I get equipment breakdown coverage without homeowners insurance?
No, equipment breakdown coverage is an endorsement (add-on) to your homeowners insurance policy. You must have an active homeowners or condo insurance policy to add equipment breakdown coverage. If you're looking for standalone protection, consider a home warranty instead - though it works differently and costs more annually.
Does equipment breakdown coverage increase my insurance rates?
Adding equipment breakdown coverage increases your premium by $25-75/year, but filing a claim typically won't raise your base homeowners insurance rates. Unlike liability or property damage claims, equipment breakdown claims are considered "no-fault" incidents. However, multiple claims in a short period might affect your rates. Check with your specific insurer about their claims policy.
Is equipment breakdown coverage tax deductible?
No, homeowners insurance premiums (including equipment breakdown coverage) are not tax deductible for your primary residence. However, if you use part of your home for business or have a rental property, you may be able to deduct a portion of the premium as a business expense. Consult with a tax professional for your specific situation. Learn more at IRS.gov.
Protect Your Home's Expensive Systems
For $25-75/year, equipment breakdown coverage protects your most expensive home systems from sudden failures. If you have solar panels, heat pumps, or other high-value equipment, it's one of the best insurance add-ons you can buy.
Sources & Methodology:
- Insurance industry data from Insurance Information Institute (III.org)
- Equipment breakdown coverage terms verified from major insurers (December 2024)
- Pricing data based on quotes from State Farm, Allstate, Nationwide, and USAA
- Claims examples based on aggregated insurance adjuster reports
- HVAC and renewable energy equipment costs from contractor surveys and manufacturer MSRPs