Machine Downtime & Lost Revenue Cover

What's Covered

Machinery business interruption insurance, often structured as a consequential loss extension within a specialist plant policy, can cover:

• Loss of revenue directly caused by an insured machine being off the job
• Increased cost of working: the additional, reasonable expenditure incurred to minimise the interruption (such as hiring alternative plant)
• Contributions toward alternative machine hire or rental while repairs are underway

Cover typically activates only once an underlying physical damage claim has been accepted. It applies during the period the machine is out of service as a direct result of that accepted loss.

What's generally not covered: revenue losses unconnected to the insured loss, losses arising from wear and tear or gradual deterioration, and losses you could reasonably have avoided. Whether breakdown claims (as distinct from accidental damage) trigger the extension varies by policy, always check the wording.

This is general information only. Policy terms vary significantly between insurers and wordings.

What Affects the Premium

Machinery business interruption premiums vary based on a number of factors. Here's what typically influences the cost:

• Revenue generated by the machine: the higher the income at risk, the higher the premium. Insurers need to understand what the machine actually earns to price the exposure.
• Type and value of the plant: heavier, more specialised, or higher-value machines typically carry higher premiums, both for physical damage and for consequential loss.
• Availability of replacement plant: if alternative machines are readily available for hire in your region, the potential duration of an interruption is shorter, which can reduce the premium.
• Claims history: a history of physical damage claims on the machine affects how insurers view the consequential loss risk attached to it.
• Nature of your contracts: operators locked into fixed-term contracts with penalty clauses for delays carry more revenue risk than those with flexible work arrangements.
• Whether cover is standalone or an extension: a consequential loss extension within a plant policy is typically priced differently to a standalone business interruption policy. The right structure for your situation affects both the cost and the scope of cover.

This is general information only. For a quote based on your actual circumstances, get in touch with our team.

When the Machine Stops, So Does the Money

Most plant operators think about insurance in terms of the machine itself. What it costs to repair. What it costs to replace. That's the obvious risk, and it's real.

But here's what actually happens when a machine is off the job for three weeks: the repair bill gets paid, and then the operator looks at their bank account and realises the repair was the smaller problem. The contracts that went to someone else. The crew that had to be stood down. The client who won't wait. That's the damage that doesn't show up on the repair invoice.

Machinery business interruption insurance exists specifically for this scenario. It's not about fixing the machine, it's about what happens to your business while the machine is being fixed.

What Consequential Loss Cover Actually Does

Some specialist plant insurance wordings include what's called a consequential loss extension. This is the mechanism that bridges the gap between physical damage cover and revenue protection.

The way it typically works: if your machine suffers a loss for which a claim is accepted under the physical damage section of your policy, the consequential loss extension can then respond to the financial fallout. The key word there is "if", the extension generally only activates once the underlying physical damage claim has been accepted. No accepted claim, no revenue cover.

Increased Cost of Working

One component of these extensions covers the increased cost of working. In plain terms: the additional, reasonable expenditure you incur specifically to keep your business running while the machine is out of action.

Say you run an excavator and it's off the job for repairs. You hire in a machine to keep a contract on track. That hire cost, above and beyond what you'd normally spend, is the kind of thing an increased cost of working provision is designed to address. The insurer isn't covering your normal operating costs. They're covering the extra you had to spend because of the loss.

Most wordings require that the expenditure is necessarily and reasonably incurred, and that it's for the sole purpose of minimising the interruption. That's a meaningful threshold. Spending money that wouldn't actually reduce the loss, or that goes beyond what's reasonable, is unlikely to be covered. Your broker can help you understand where that line sits.

Loss of Revenue

The other component is loss of revenue, the income you didn't earn because the machine was out of service. This is harder to quantify, and the documentation requirements reflect that. Expect to provide financial records that establish what your revenue actually was, and demonstrate the direct link between the machine being off the job and the revenue not coming in.

Insurers will also expect you to take reasonable steps to avoid or reduce the loss. That might mean reorganising work schedules, redirecting other resources, or sourcing alternative plant. The cover isn't a substitute for doing everything you reasonably can, it's a backstop for the losses you couldn't avoid.

Hire of a Replacement Machine

Some wordings go further and include a specific provision for the hire or rental of an alternative machine. This overlaps with increased cost of working in some respects, but it's worth checking whether your policy addresses it separately, particularly if you operate hired-in plant as part of your normal business model.

The contribution toward hire costs is typically calculated on the additional cost necessarily incurred to minimise the interruption. It's not a blank cheque for any rental arrangement you enter into, the connection to minimising the business interruption needs to be clear.

What This Cover Doesn't Do

Being clear about the limits of this cover is just as important as understanding what it does.

Consequential loss extensions on plant policies are not the same as a full business interruption insurance policy. Full BI cover is typically structured around your gross profit, with an indemnity period that can run for months or years, and it's designed to sustain the entire business through a major disruption. The consequential loss extensions found on some plant wordings are more targeted, they respond to a specific machine being off the job, and they're bounded by the terms of that extension.

For a one-machine operator, this distinction matters enormously. If your entire revenue depends on a single piece of equipment, a dump truck or tip truck, a specialised piece of machinery, the consequential loss extension on your plant policy might provide meaningful short-term protection. But it may not be designed to carry you through an extended outage or a total loss scenario.

That's a conversation worth having with your broker before something goes wrong, not after.

What's Typically Excluded

Most consequential loss provisions won't respond to:

• Revenue losses that aren't directly caused by the insured loss to the machine
• Losses arising from wear and tear, rust, corrosion, or gradual deterioration
• Situations where the underlying physical damage claim isn't accepted
• Losses you could have reasonably avoided but didn't
• War, terrorism, and similar excluded events (standard across most policies)

Machinery breakdown, as distinct from sudden accidental damage, is also worth checking separately. Machinery breakdown insurance covers mechanical or electrical failure, and whether a consequential loss extension applies to a breakdown claim (as opposed to an accidental damage claim) varies by policy wording. Don't assume they're the same.

The One-Machine Operator Problem

If you run a fleet, losing one machine is painful but survivable. You redirect work, shuffle the schedule, and keep most of your contracts moving.

If you run one machine, losing it is a different situation entirely. Your entire revenue-generating capacity is sitting in a workshop waiting for a part that's on a six-week backorder from Germany. Every day it's off the job is a day you're not earning.

This is where the gap between physical damage cover and revenue protection becomes most visible. The insurer might settle the repair claim promptly and correctly. But if your policy doesn't include a consequential loss extension, or if the extension isn't structured to match your actual revenue exposure, you're absorbing the income loss yourself.

One-machine operators can end up with good physical damage cover and inadequate (or no) cover for lost revenue. The machine is insured. The business isn't.

How to Check Whether You're Actually Covered

Not every plant policy includes a consequential loss extension. Some do as a standard inclusion; others offer it as an optional add-on; some don't offer it at all. The only way to know is to read the policy wording, or have a broker read it for you.

Here's a practical checklist for reviewing your current cover:

• Does your policy include a consequential loss extension? Check the policy schedule and wording, not just the summary.
• Does it cover loss of revenue, or only increased cost of working? Some extensions are narrower than they appear.
• Does it include a contribution toward alternative machine hire? This is often the most immediately useful provision.
• Does it apply to breakdown claims as well as accidental damage? The answer varies significantly between wordings.
• What documentation will you need to support a claim? Financial records, contracts, hire invoices, know what's required before you need it.
• Is the level of cover proportionate to your actual revenue exposure? A limit that made sense three years ago may not reflect what your machine earns today.
• Does your policy sit alongside or overlap with a separate business interruption policy? Understanding how they interact matters.

If you can't answer these questions from your current policy documents, that's a sign the policy needs a proper review.

The Broker Difference at Claim Time

Consequential loss claims are among the more complex claims in the plant insurance space. They require documentation. They require a clear causal link between the physical damage and the revenue loss. And they sometimes require negotiation with an insurer who has legitimate questions about the numbers.

This is where having a broker in your corner makes a tangible difference. A direct insurer represents itself. A broker represents you. When a claim involves disputed revenue figures or questions about whether costs were necessarily incurred, having someone who knows the wording and knows how to present a claim is worth more than most people realise until they need it.

At Gerrards, we have access to up to 20 insurers across the New Zealand market. That means we can compare plant policy wordings, including the structure and scope of consequential loss extensions, across a range of options, not just whatever a single insurer happens to offer. We also review policies annually, because a cover structure that worked when you had one machine may need to change when you have three.

This Is General Information

Every business is different, your policy needs will depend on your specific circumstances, the nature of your operations, and the revenue your plant generates. This is general information only. For advice tailored to your situation, get in touch with our team.