Key Takeaways
- Equipment insurance allows business owners to insure against the loss of their tools and equipment.
- These “floater” policies are a form of property insurance that covers certain types of moveable equipment without regard to its location.
- Most equipment insurance policies are “all risks” and cover such incidents as thefts, fires, floods, and vandalism.
- Insurance companies will either reimburse for the actual cash value (ACV) or replacement cost of the property.
- Equipment breakdown insurance policies can be purchased as stand-alone policies or they can be included in property insurance policies.
How Equipment Insurance Works
Equipment insurance covers loss of or damage to tools and equipment owned by a contractor or business. It’s a form of inland marine insurance, which covers equipment that can be easily moved from one location to another over land, unlike commercial property coverage, which covers equipment that stays on the business’s premises.
- Alternate names: Contractors equipment insurance, commercial contractors equipment insurance, equipment floater insurance
Equipment insurance policies can cover small or large tools, rented or borrowed equipment, work-related clothing, and more.
For example, let’s say a general contractor is working on a remodeling project at a house in a suburban development. The contractor typically leaves their tools at the worksite. But one night, the house is broken into and their tools are stolen. The contractor can file a claim on their equipment insurance policy to recoup the value of the covered tools.
Equipment insurance covers tools and equipment when they are located at a specific worksite or while in transit from one site to another. The types of equipment covered by equipment insurance policies can include bulldozers, road graders, forklifts, loaders, backhoes, concrete mixers, tools, and more.
Note
Most policies provide a broad range of coverage against such losses as theft; damages caused by fires, floods, or other natural disasters; equipment breakdowns; vandalism; and other types of damages at all covered worksites. Exclusions to coverage are stated in the policy.
If a loss is covered, equipment insurance often will also pay for other costs, such as accident cleanup and debris removal. The policy may also pay for additional services or supplies needed to keep the work project on schedule.
Some equipment insurance policies even reimburse businesses for the cost of a reward that leads to the return of lost or stolen equipment or to the arrest of whoever stole or damaged it.
Policies can either pay for replacement costs or the actual cash value (ACV) of the equipment. Replacement cost policies will reimburse contractors for the repair or replacement of damaged property with equipment of a similar age, condition, and quality. ACV policies reimburse for the replacement costs of the property at the time of the loss minus depreciation.
Note
Some policies will only cover the replacement costs of equipment up to five years old, then switch the coverage to ACV, so business owners should be aware that equipment will eventually age out the replacement cost option.
Types of Equipment Insurance
There are several types of equipment insurance coverage. Scheduled coverage will include a specific listing of the equipment that is being insured. In some cases, additional equipment can be added to the list after the policy becomes effective.
Blanket coverage will cover any property that is in a category mutually agreed upon by the business owner and the insurer to be “covered property.” Another type of coverage is a combination of both scheduled and blanket that may include scheduled coverage for more expensive items—say, those over $5,000—and blanket coverage for lower cost items.
Equipment insurance can also include equipment breakdown insurance. Once known as boiler and machinery insurance, it is one of the core coverages in a business owner’s policy (BOP).
Equipment breakdown insurance protects your company’s mechanical, electrical, and computer equipment from unexpected breakdowns. It covers five categories of equipment: mechanical, electrical, computers and communication systems, air conditioning and refrigeration systems, and boilers and pressure equipment.
In addition to covering repair and replacement costs, most policies also will cover time and labor costs, lost income, spoiled inventory, and other expenses incurred during the restoration period.
Frequently Asked Questions
Who Needs Equipment Insurance?
Contractors or any business that owns valuable machinery and equipment that is moved from one location to another may benefit from equipment insurance. It provides coverage where commercial property and business auto policies do not.
Business property can be covered under a commercial property policy, but these policies often exclude coverage for property that moves from location to location. If your business depends on your ability to use certain tools and equipment, it’s important to ensure they are covered.
Auto policies for a business often exclude coverage for mobile equipment. In general, “special mobile equipment” such as earthmovers, tractors, and forklifts are not considered automobiles for insurance purposes because they are not primarily used for transporting people.
Should I Insurance My Tools?
You should consider insuring your tools and equipment if you rely on them for a business. You can take out an equipment insurance policy to protect your tools and equipment in the event of theft, loss, or damage.
