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Machinery is the backbone of productivity for Australian businesses, but the age of the equipment can change what is needed from insurance.
Interestingly, while a lot of Aussie companies – around 78% according to surveys – use second-hand machines to save money, nearly half (43%) of all machinery insurance claims in 2022 involved equipment that was more than a decade old. This suggests a real problem: your typical insurance policy might not properly cover the specific risks that come with older gear.
So, whether you've got the latest tech or a rusty old forklift, making sure your business equipment insurance lines up with the age and condition of machinery isn't just about getting a good deal – it's about seriously protecting your profits.
Key Differences in Insurance: New vs. Used Equipment
New and used machinery carry distinct risks, which insurers reflect in equipment coverage terms and premiums.
Depreciation and Policy Value
New equipment retains its full value initially, qualifying for agreed-value policies that guarantee a fixed payout for replacement.
For example, a new $200,000 CNC machine depreciates by about 20% per year. After five years, its actual cash value (ACV) becomes $80,000, meaning a standard policy might only cover up to that amount.
Used equipment is assessed using ACV, which can leave businesses undercompensated if repair costs exceed the depreciated worth. A 2021 case study found that a bottling plant lost $150,000 when a depreciated mixer failed—the insurance payout of $45,000 fell short of the $90,000 repair-and-downtime costs.
Risks of Older vs. Newer Equipment
- Breakdown frequency: Machines over 10 years old have 70% higher breakdown rates than recent models (Australian Machinery Association, 2023).
- Repair costs: A 2022 repair survey noted that older machinery incurs 30–40% higher maintenance bills due to parts obsolescence.
- Claims history: Insurers charge 15–20% higher premiums for equipment over seven years old to offset elevated claim probability.
Newer machinery benefits from manufacturer warranties, modern safety features (e.g., sensors that reduce operator error), and advanced diagnostics that minimise downtime. Used machines often lack these protections, increasing liability risks.
Insurer Risk Assessments
Insurers price policies based on age-related risk factors:
- Warranty coverage: New equipment often comes with manufacturer warranties (3–5 years) that lower insurers’ risk exposure.
- Technology advancements: GPS tracking, anti-theft systems, and energy-efficient components in new machines reduce risk premiums by up to 12%.
- Maintenance records: 58% of policies for used equipment require detailed service logs from the past three years.
Customising Your Policy for New and Used Machinery
A one-size-fits-all approach to insurance for machinery rarely works. Here’s how to optimise your machinery policy for both new and used assets.
- New equipment: Use all-risk cover for comprehensive protection. A bakery that lost a new dough mixer to vandalism received full replacement under an all-risk policy, whereas a named-perils policy might have excluded theft.
- Used equipment: Opt for named-perils policies to avoid overpaying for unnecessary coverages. For example, a 10-year-old truck used in a rural area might only need protection against fire, flood, and theft.
Address Specific Risks
- Breakdown cover: Essential for aging machinery. A 2020 survey found that businesses using breakdown assistance saved 40% in repair costs during outages.
- Wear-and-tear exclusions: Insurers often deny claims for gradual deterioration. Ensure your policy clarifies coverage for incremental damage (e.g., corrosion from frequent use).
- Deductibles: Raise deductibles for older equipment to lower annual premiums. A construction firm with three 15-year-old cranes increased their deductible by $2,000, saving $6,000 annually.
Regular Policy Reviews
Equipment ages rapidly in high-use environments. A licensed electrician who upgraded from an all-risk to a named-perils policy for their 12-year-old generator saved 18% without reducing key protections. Schedule annual reviews to align coverage with each machine’s lifecycle.
How Connect Business Insurance Tailors Coverage for Your Needs
Unlike generic policies, Connect Business Insurance crafts equipment coverage tailored to your machinery’s age and usage. Our process includes:
Personalised Risk Assessments
Our experts analyse factors like:
- Average downtime per breakdown for each machine
- Likelihood of obsolescence (e.g., 15-year-old tech vs. 5-year models)
- Local repair costs (e.g., rural vs. urban areas)
Flexible Policy Options
- Market value cover for new machinery: Wraps your assets against sudden losses, like a collision damaging a new excavator.
- Named-perils policies for used equipment: Focus on high-priority risks without inflated premiums. A case in point: a dairy farm protected its 10-year-old milking system against fire and flood at 30% less than an all-risk policy.
Add-ons for Comprehensive Protection
- Breakdown assistance: Exotic car stereos may not apply here, but 24/7 technician support is available for aged machinery. A case study: A packaging company avoided $10,000 in lost revenue after fast-track repairs resolved a conveyor belt failure.
- Business interruption insurance: Compensates for income loss during unexpected downtime. This protected a bakery for three weeks while awaiting a new oven.
Local Expertise for Australian Businesses
From a vineyard using vintage tractors to a construction firm blending new and used excavators, our team understands regional challenges. We help businesses in regional NSW.
Equipment age isn’t just a number—it’s a driver of risk, cost, and coverage needs. New machines thrive under robust insurance for machinery options, while older assets demand tailored adjustments to mitigate depreciation and wear-related claims.
Stop overpaying for policies that miss the mark.
Connect Business Insurance designs business equipment insurance that aligns with your machinery’s age, value, and risks.
Request your free assessment to unlock a policy that’s as precise as your operations. Contact us now.
Note: The material offered here is for informational purposes only. It does not constitute legally binding advice and should not be a substitute for a consultation with an insurance expert.
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