Nowadays, the maintenance scheduling of equipment has been highly improved using condition monitoring (CM) systems. This paper determines the optimal inspection rate of circuit breakers equipped with CM using a novel mathematical procedure. To achieve this goal, in the first step, it is necessary to quantify the effect of CM on the early detection of minor failures of the equipment. Therefore, a mathematical formulation is provided to categorize and model the failures of the equipment based on their severity. Moreover, a new concept termed predictive maintenance (PDM) rate will be introduced and formulated in this paper. The PDM rate is applied in the maintenance process as the smart inspection rate of the equipment. In the second step, this paper proposes a new combined preventive and predictive maintenance Markov model. By developing the formulation of the proposed Markov model, an optimization problem is formed. In this optimization problem, the annual maintenance cost serves as the objective function and the inspection rates represent the decision variables. The comprehensive statistical study on the failures of 400kv‐CB of KREC in Iran and the implementation of the proposed method indicates that the CM and optimal inspection of the CB not only enhances the lifetime of the CB by 19.48 years but also lower the annual maintenance cost by 19%.