When running an active work site, one of the most important pieces of the puzzle in addition to your workers, is the tools they hold. Accidents happen all the time; tools and equipment are often lost, broken, or otherwise put out of commission. However, the job must go on, and replacing all of the tools and equipment using the money out of your own pocket can rack up fast. Learn about equipment insurance coverage and find a policy that offers you the protection you and your team might benefit from.
What Do Policies Cover?
Since coverage typically encompasses both tools and equipment, coverage can range from small devices to large machinery. However, coverage is generally offered based on these three major criteria:
1. Items Must Be Transportable
As equipment coverage is a form of inland marine insurance, coverage only applies to goods while they are being transported on land. Typically, this includes transferring tools from your primary business to the site of construction.
2. Items Must Be Less Than 5 Years Old
There are two ways that insurance typically pays out for repair and replacement costs for your tools and equipment:
- Actual cash value (ACV) insurance: Pays for the fair market values of that item at the time of its loss. Essentially, this includes the depreciation of the item over time
- Replacement cost value (RCV) insurance: Pays out the amount equal to how much the item would be if purchased new.
Most policies will focus on and favor items that are less than five years old. However, they may also pay out the repair and replacement costs for older items, but typically only on an ACV basis
3. Items Must Be Worth Less Than $10,000
Most insurance policies will have an equipment coverage limit of $10,000, which also generally serves as the maximum payout during the policy period. Expensive and top-of-the-line equipment is typically either not covered or under different special policies. When those9 7inj packages are offered, they will most likely have steep premiums.
What Items Are Covered?
Again, specific coverage will vary depending on your policy. However, here is a list of items that most policies would cover:
Axes, chisels, digging bars, hammers, hand saws, levels, pliers, screwdrivers, shovels, spades, tape measures, trowels, and wrenches
Air compressors, angle grinders, biscuit joiners, circular saws, drills, impact drivers, jackhammers, nail guns, and reciprocating saws
Backhoes, bulldozers, cement mixers, compactors, cranes, excavators, forklifts, graders, pavers, tractors, trenchers, and wheel loaders
Clothing and protective gear:
Hard hats, hearing protection, high-visibility vests, protective clothing, respirators, safety gloves, safety goggles, safety harnesses, and safety shoes
Hand trucks, ladders, sawhorses, scaffolding, stand lights, toolboxes, wheelbarrows, and workbenches
Camcorders, copiers, desktop computers, laptops, monitors, projectors, and tablets
Some policies will also offer to cover tools and equipment that are rented or borrowed as well as sometimes planning tools, like maps or blueprints.
What Incidents Are Covered?
Policies are often written on an all-risks basis, meaning that coverage may include incidents not specifically listed in your policy document. Some events that are typically covered include:
This can include theft that occurs on the job site, tools during transportation, and while they are being stored in a facility.
Incidents where employees unintentionally break or damage equipment are covered. Policies may also pay out loss or damage caused by unforeseen incidents such as water leaking on power tools or electronics.
Severe weather events may also be covered by your policy, depending on location. Sometimes policies won’t automatically cover floods or earthquake damage, but this can be extended depending on your provider
This covers any vandalism that may happen during transportation or on the job site.
What Costs Are Covered?
As the last part of your policy, some companies may also include financial protections in the event of broken or lost tools causing delays to your project timeline. Some costs that may be covered include:
Repair and Replacement Costs:
As mentioned above, depending on the age of your items, insurance may or may not offer to pay the ACV of your tools and equipment. Items that are less than five years old are typically covered on an RCV basis.
If construction is ceased due to damaged equipment, policies sometimes cover the income lost during that time. Generally, they will only cover from the beginning of the incident until it has been replaced or repaired.
Depending on the delay you experience, suppliers and other services may charge late or extension fees. Some policies will offer to cover these expenses.
If your equipment is damaged and it ends up causing more damage or mess around the site, the clean-up and removal of the debris may be covered.
Rewards for Information
If your items are stolen, and a reward is given out when they are found, policies may offer to pay the lead or finder.
What is Excluded?
Equipment insurance covers a lot, however, there are some common exclusions that you should be aware of:
Normal Wear and Tear
This is why policies typically consider the age of your items before they cover them. Normal wear and tear that occurs over years of use won’t be covered. This includes rust, corrosion, and electrical or mechanical breakdown.
Insurance will not cover equipment that has been damaged deliberately by staff. Similarly, if items are misused or damaged due to negligence, policies may revoke coverage.
Electrical and Mechanical Breakdown
Policies will typically not cover equipment that suffers an electrical or mechanical breakdown, although some may offer extensions. Some insurers offer specific coverage for this called equipment breakdown insurance.
Tools and equipment insurance will typically only cover items that are able to be transported, as mentioned above. Immobile equipment and machinery are not covered, although this may be included in equipment breakdown policies.
The vehicles used to transport staff and other people are not covered. This includes cars, trucks, and vans. For coverage, you will likely have to purchase commercial auto insurance.
Who Needs Insurance?
Companies that rely heavily on the daily use of tools and equipment are encouraged to get equipment coverage. Being able to bounce back quickly in cases of damaged equipment can end up saving you a significant amount of money and stress.
Insurance is recommended for but not limited to:
- Cleaning and janitorial services
- Construction businesses
- Heating, ventilation, and air conditioning (HVAC) technicians
- Landscaping businesses
- Professional installation services
- Tradespeople, including carpenters, electricians, and plumbers
- Companies that rely heavily on computers and other electronic devices/equipment
Overall, when considering whether equipment coverage is right for your company, it's important to think about the value of your equipment and how essential it is to daily tasks. However, unless you own specialized equipment, coverage will most likely benefit you. Some policies are restrictive on how much coverage they offer, so it's equally important to keep a close eye on your premiums and whether they are too high or even too low for what coverage you need.
Learn more and get a FREE quote to find out if our equipment coverage policy is right for you. Or check out our different forms of comprehensive contractor insurance to make sure you are covered from head to toe.