Why You Need Tools and Equipment Insurance

Why You Need Tools and Equipment Insurance - Hero

As a contractor, you rely on your tools and equipment to get the job done. Unfortunately, construction tools and equipment are prone to theft, damage, and loss. When any of these things occur, it can mean significant production downtime, a loss of income, and even the cancellation of projects, plus the cost to replace the items.

Mitigate Financial Loss

To protect your valuable tools and equipment and keep your projects on track, Tools and Equipment insurance is available. A Tools and Equipment policy* may provide coverage for stolen or damaged items. You may be paid the costs to repair or replace the covered items that are stolen, vandalized, or damaged, up to the policy amount, less any deductible or applicable coinsurance amount. In addition, some policies will provide loss of income/business interruption coverage and compensate you for the income you did not receive from the time of the incident until a repaired or replaced item became available.

You need this specialized coverage, as a Commercial Property policy doesn't cover items in transit or left at a job site; it covers inventory and equipment only when kept at a covered location such as your business premises. On the other hand, a Tools and Equipment policy, a form of Inland Marine insurance, covers materials or equipment that are mobile or transportable.

All-Risk Coverage

Coverage can be written on an all-risk basis, covering everything except what is excluded in the policy, such as damage or loss due to wear and tear, corrosion, or rust. Covered property typically includes power tools, hand tools, clothing and protective gear, and miscellaneous equipment like ladders, workbenches, and lighting. You may be able to cover heavy machinery, such as backhoes, excavators, and bulldozers, but the limits of a standard Tools and Equipment policy are typically lower than what you would need to protect these large items adequately. You should get a separate policy for heavy equipment.

*NOTE: The insuring agreement in a policy sets out the covered perils, assumed risks, and nature of coverage that the insurance company provides to its insured in exchange for the premiums paid. Thus, the terms and conditions of the policy will dictate whether coverage exists and the nature of any potential benefits.