Technical insurance for SMEs: covering machinery, equipment, and breakdowns
Critical failure: an underestimated risk in SMEs
When one machine stops, everything stops.
A small or medium-sized enterprise (SME) can be perfectly insured against fire and theft, and yet be weakened by a technical failure.
A machine, a production line, a server, medical equipment or a measuring device can break down suddenly, without a “classic” event covered by property insurance.
The consequences: repair costs, urgent parts, subcontracting, customer delays, and sometimes data loss or recalibration.
Technical insurance aims to cover sudden and unforeseen damage to defined equipment, according to the contract, and can be combined with business interruption coverage.
In Geneva and French-speaking Switzerland, they become essential as soon as a piece of equipment becomes a bottleneck.
Technical insurance: realistically covering the risk of "breakdown".
The right contract reflects your machine fleet and dependencies.
Technical insurance includes coverages designed to protect SMEs against sudden and unforeseen damage affecting specific technical equipment: production machines, installations, electronic equipment, medical equipment, measuring systems, and sometimes IT infrastructure depending on the product.
These policies differ from traditional property insurance, which primarily covers external events (fire, water damage, theft) but may exclude or limit internal breakdowns and damage without external causes. The objective is to address the risk of "breakdown," which can be the primary cause of business interruption for some companies.
What technical insurance typically covers is the repair or replacement of the insured equipment when physical damage results from a sudden, accidental and unforeseen event, according to the contractual definition.
Contracts may include additional charges: dismantling, reassembly, transport, or certain emergency measures.
In some arrangements, an extended business interruption insurance policy may supplement compensation by covering loss of margin or additional costs during the restoration period, if the stoppage results from covered damage.
The key points of concern are the exclusions, as they define the boundary between “guaranteed breakdown” and “maintenance”.
Wear and tear, corrosion, lack of maintenance, progressive defects, known uncorrected defects, or maintenance errors are often excluded.
Some contracts also exclude certain components (wear parts, consumables) or apply sub-limits. Purely intangible damages, such as a software error without physical damage, may be excluded or covered by specific cyber or IT insurance policies.
Furthermore, preventative measures are important: scheduled maintenance, service records, periodic inspections, and adherence to manufacturer's instructions. In the event of a claim, the insurer will often request evidence: maintenance history, breakdown reports, diagnostics, estimates, and sometimes expert assessments.
Choosing the right level of coverage requires a structured approach. The first step is to establish an inventory of the technical equipment: critical equipment, replacement value, age, availability of parts, dependence on a single supplier.
The second step is to map the shutdown scenarios: which orders are impacted, what penalties or constraints exist, and what alternatives (subcontracting, rental, redundancy) are possible.
The third step is to define the deductible policy: what share of costs the SME is willing to bear for minor breakdowns, and from what threshold the insurance should intervene.
Fourth step, decide on the extensions: business interruption losses, additional expenses, urgent parts coverage, or specific guarantees related to your sector.
A useful mini-list includes checking the definition of the insured event, the exact list of covered equipment, wear and tear and maintenance exclusions, sub-limits of ancillary costs, and maintenance documentation requirements.
Mage & associés can support you by analyzing your technical dependencies, identifying the "blocking points" of your production or services, and then organizing a policy review.
The goal is to transform technical insurance into a continuity tool: clear coverage, a ready reporting process, and a consistent maintenance policy, rather than a theoretical contract that leaves a gap at the time of failure.
Three major risks covered by technical insurance
Where the "things" police often leave a void.
Machine breakdown and internal damage
An internal failure, a short circuit, or a mechanical break can damage the equipment without fire or theft.
Technical insurance covers this type of sudden damage, according to the contract.
Exclusions related to wear and tear and maintenance are a key point to check.
Repair costs and urgent parts
Repair, replacement, express transport, disassembly/reassembly: the additional costs can exceed the part itself.
According to the contract, certain costs may be covered, with sub-limits.
Technical documentation and quotes are crucial.
Business interruption losses due to the breakdown
Technical shutdowns sometimes result in production losses and additional costs.
An “interruption” extension may apply if the breakdown is an insured event, according to the contract.
Waiting times and calculation methods vary.
Critical machine breakdown: repair, subcontracting, takeover
Realistic fictional example, in an industrial SME in French-speaking Switzerland.
Realistic fictional example.
A small business in French-speaking Switzerland manufactures small series with a digital cutting machine which represents a bottleneck.
One morning, an internal malfunction caused damage to a critical component. There was no fire or theft, but production stopped immediately. Customer deadlines became critical.
The SME reports the incident to its technical insurance company, providing diagnosis, photos, maintenance history and quote.
A key factor is proof of regular maintenance, as the contract excludes wear and tear and lack of maintenance. The insurer then validates the event as sudden and unforeseen damage, within the contractual limits.
The SME undertakes urgent repairs and temporarily subcontracts part of its production to minimize delays. Additional costs are documented, and business interruption insurance coverage applies as per the terms and conditions.
The recovery is being done step by step: replacement of parts, testing, recalibration, then return to normal production rate.
The operational lesson: technical insurance works when the machine fleet is properly declared, maintenance is documented, and the continuity plan provides realistic alternatives.
Insurance does not prevent breakdowns, but it prevents them from bringing the SME to its knees.
