Contractor's Equipment Insurance Explained

General liability coverage? Check! Commercial property insurance? Check! A business owners policy that combines both? Check!

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Does this mean you have all your bases covered when it comes to protecting your business property?

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Well, almost!

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You might be surprised to learn that these policies don’t always cover business equipment that moves from one job site to another. That’s where contractor’s equipment insurance comes in handy. Here’s everything you need to know about this insurance.

What is Contractor’s Equipment Insurance? 

If you’re on the hunt for insurance coverage that protects your business equipment, consider a contractor’s equipment policy.

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Contractor’s equipment insurance covers the repair or replacement of your equipment if it’s lost, stolen, or damaged. It’s a floater policy, meaning it moves with your equipment. Your gear is covered whether it’s being transported in a vehicle, stored in a trailer, or used at a job site.

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Contractor’s equipment insurance is a great supplement to other kinds of business insurance. You may be able to get it as a stand-alone annual policy, but providers often sell it as an add-on to common insurance products like: 

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• General liability insurance 
• A builder’s risk policy
• An insurance bundle (such as a commercial package policy)

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Contractor’s equipment insurance is sometimes called tools and equipment insurance. It’s also a type of inland marine insurance. That name is confusing, for sure, since we’re not talking about anything boat related. 

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Inland marine is a large category of insurance that covers materials, products, and equipment transported over land, like with a van or truck, or stored in a third-party warehouse–for all different types of industries.

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Contractor’s equipment insurance is one subset of inland marine insurance that applies only to contractor’s equipment. If you’re a photographer, for example, you’d get a different type of inland marine insurance.

What’s Covered Under Contractor’s Equipment Insurance?

Contractor’s equipment insurance covers both large, expensive equipment and smaller, specialized tools, like: 

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• Track hoes
• Forklifts
• Nail guns
• Sanders
• Computer equipment
• Data and media

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It can pay for replacements and repairs if your tools or equipment are:

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• Damaged by an accident or vandalism, such as falling objects, smoke, and water damage
• Hit by natural disasters, like windstorms, fires and floods
• Stolen
• Lost

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With equipment insurance, you’re typically covered for the equipment you own, along with employee tools, clothing, and safety supplies essential to your work. The catch is that you have to list out all your tools, including their make, model, and serial number, if they’re over a certain value (such as $2,500) to get coverage for them.

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You can list your current equipment to start and add new equipment to your policy later on. Otherwise, those tools may fall under your policy’s blanket coverage, which gives a per item and per occurrence limit for miscellaneous tools not specifically listed in the policy. 

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For example, insurers may only cover up to $500 per item and up to $10,000 total for any one claim. Ask your insurance broker what your blanket coverage options are.  Pay attention to whether you have actual cost value coverage (ACV) or replacement cost coverage. There’s a big difference in what your reimbursement can be. ACV only replaces lost property at its value when it went missing—which may be much less than needed when buying the same item and brand. 

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Replacement cost doesn’t consider wear and tear over the years. Instead, your insurer reimburses you for the amount needed to replace your old item with one that’s the same or similar when new. This coverage costs more—but also may pay for itself if you have a loss. For an added fee, your insurance company might also cover expenses related to the loss, like cleaning up debris, paying for fire department services or speeding up a project that fell behind after a loss. 

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You may be able to get additional coverage for borrowed equipment if your policy doesn’t already include it. 

What’s Not Covered by Equipment Insurance?

Every policy is different, but there are some common exclusions to keep in mind as you shop for the perfect equipment coverage. For example, wear and tear usually isn’t covered. 

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Also, your equipment might not be covered if: 

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• It’s too old: Some insurers don’t cover equipment over a certain age, such as five years.
• It’s unlisted: Items not specifically listed out in your policy usually come with special terms.
• It’s a new purchase: If you buy equipment after getting a contractor’s equipment policy, it’s usually covered for a short period of time. After that, you might need to name that tool in your policy to get full coverage for it.

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Make sure the policy fits your special insurance needs. For example, if your small business relies on rental equipment, take a closer look at your policy terms. 

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If you’re lucky, your insurance company will include coverage for an equipment rental by default. But some policies charge extra for rented equipment, and some don’t cover them at all.

How Much Does an Equipment Insurance Policy Cost?

Equipment insurance generally has relatively low monthly premiums—anything from $13 to $70+ per month might be a reasonable amount to pay, depending on where you live, how pricey your equipment is, your claims history, and more. 

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For large equipment, the insurance cost varies depending on the type of equipment and its replacement value. Don’t be surprised if your policy comes with a deductible.

Don’t Leave Your Equipment Unprotected

A contractor’s equipment policy is smart for any small business owner, especially if your crew regularly moves equipment between worksites. You get peace of mind knowing you won’t have to pay as much out of pocket for loss or damage. All that you might owe is your deductible. 

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Not to mention, damaged or stolen property can seriously slow down progress, even in the short term. When it’s time to make a claim, a good equipment insurance policy pays for reimbursements quickly—getting your business up and running at full speed again in no time.