Category: Engineering specialty · Reviewed by Mark Fox, Broker · Renewals · Last reviewed 2026-06-05
Computer breakdown insurance is the engineering insurance sub-class providing first-party indemnity for sudden and accidental breakdown of computer equipment, plus extensions for data restoration, increased costs of working following breakdown, and computer downtime business interruption.
Category: Engineering specialty Also known as: computer all risks, IT breakdown insurance First codified: UK market practice from c.1970s Related legislation: Insurance Act 2015 [1]; Data Protection Act 2018 [2]; Health and Safety at Work etc. Act 1974 [3]
Computer breakdown insurance covers physical loss of or damage to computer equipment caused by sudden and accidental mechanical, electrical or electronic breakdown. The cover developed in the 1970s as commercial computing became widespread and the existing machinery breakdown insurance class extended to address the specific exposures of electronic data processing equipment [4][5].
The principal sections of a typical computer breakdown policy are:
Section 1 — Physical damage to equipment: cover for sudden and accidental breakdown of mainframe computers, servers, desktop and laptop computers, network equipment, peripherals and ancillary equipment.
Section 2 — Data restoration: cover for the costs of restoring lost or corrupted data following a covered breakdown event, including the costs of data recovery specialists, software re-installation and re-keying of lost transaction data.
Section 3 — Increased costs of working: cover for the additional costs incurred to maintain operations following a breakdown (alternative processing facilities, temporary equipment hire, manual processing costs).
Section 4 — Computer downtime business interruption: cover for the lost gross profit during the downtime period attributable to the breakdown, often with a specific ‘time excess’ (the deductible expressed in hours or days of downtime rather than in monetary terms).
Section 5 — Increased costs and consequential losses: cover for various additional consequential losses arising from the breakdown.
In modern practice, computer breakdown insurance has been substantially affected by the emergence of cloud computing and Software-as-a-Service architectures. Many traditional ‘computer breakdown’ exposures have migrated to cloud providers, with the operator’s direct exposure reduced to its own connectivity and end-user devices. The product has correspondingly evolved to address more limited residual exposures, while the broader cyber-related exposures are addressed through dedicated cyber insurance products [4][5].
Computer breakdown insurance is governed by the general law of insurance contract in the UK, modified by the Insurance Act 2015 for non-consumer business. There is no specific statutory inspection regime for computer equipment equivalent to that for boilers, pressure vessels or lifting equipment [1][3].
The Data Protection Act 2018 (implementing the EU General Data Protection Regulation, retained as UK GDPR) governs the processing of personal data and imposes duties on data controllers and processors to implement appropriate technical and organisational measures to protect personal data. Computer breakdown events that result in unauthorised access to personal data may trigger reporting obligations to the Information Commissioner’s Office and to affected data subjects, with potential regulatory fines under the GDPR regime. These regulatory obligations are typically covered under cyber insurance rather than computer breakdown insurance per se, but the interaction between the two product classes requires careful coordination [2][6].
The Network and Information Systems Regulations 2018 (NIS Regulations) impose security and incident reporting obligations on operators of essential services (energy, transport, banking, healthcare, drinking water, digital infrastructure) and on relevant digital service providers. Computer breakdown events affecting NIS-regulated entities may trigger reporting obligations to the relevant Competent Authority, with potential enforcement consequences for non-compliance [7].
The Computer Misuse Act 1990 makes unauthorised access to and modification of computer material a criminal offence. Computer breakdown events that involve criminal access are typically addressed through computer crime insurance rather than computer breakdown insurance, with computer breakdown responding to accidental breakdown only [8].
A UK commercial customer arranges computer breakdown insurance either as a standalone product or (more commonly) as part of a combined engineering insurance programme. The cover is on a schedule of insured items basis (with major IT equipment scheduled) or on a ‘blanket’ basis (with cover for all computer equipment up to an aggregate limit) [4][5].
Premium for computer breakdown insurance is typically a flat annual sum based on the schedule of equipment or the aggregate limit, with rates relatively low reflecting the generally favourable claims experience of modern computer equipment. The cover is increasingly bundled with broader IT and cyber-related covers in unified ‘cyber and tech’ products [4][5].
Claims handling for computer breakdown events typically involves the engineering insurer’s IT specialists working alongside the insured’s IT team and the equipment manufacturer’s support services. Common claims include hard disk failures, power supply failures, network equipment failures, and (less commonly but with higher severity) major server or mainframe failures requiring substantial replacement and data restoration [4][5].
The integration between computer breakdown insurance and cyber insurance requires careful management. A single incident may involve elements of both (accidental breakdown leading to data loss, with potential GDPR consequences) and the policy interactions need to be coordinated to avoid gaps or duplications. Modern broking practice typically places both covers together with the same broker to facilitate coordinated claims handling [4][5].
Standard computer breakdown: scheduled or blanket cover for sudden and accidental breakdown.
Computer all risks: broader cover including external causes (impact, malicious damage, certain natural perils) typically excluded from standard computer breakdown.
Server room property cover: dedicated cover for the server room or data centre environment, including power supply infrastructure, environmental controls and physical security systems.
Data restoration cover: standalone cover for data restoration costs, increasingly important as data has grown in commercial value.
Computer downtime BI: standalone or extension cover for business interruption from computer downtime, with time-based deductibles.
Cloud service provider cover: cover for the operator’s losses arising from cloud service provider failures, addressing the operator’s residual computing exposure in cloud-first IT architectures.
End-user device cover: cover for laptops, tablets, smartphones and other end-user devices, typically arranged under broader commercial property or contents insurance.
Electronic equipment insurance: broader cover for electronic equipment including but not limited to computers.
A UK financial services company operates a head office IT infrastructure including approximately 80 servers, network infrastructure, 600 end-user computers and a substantial telephony system. The company arranges computer breakdown insurance as part of its combined engineering insurance programme, with cover of £1.2m for IT equipment plus £400,000 for data restoration and £600,000 for computer downtime business interruption (with a 24-hour time excess). Annual premium for the combined IT-related cover is approximately £8,500. During the policy year, a power supply failure damages two servers and corrupts associated data; the computer breakdown cover responds for the equipment repair cost (£35,000) and the data restoration cover responds for the data recovery specialist fees and IT team overtime (£18,000). The downtime is just under 24 hours so the business interruption cover does not engage. Figures in this example are illustrative.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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