What is Contractor Tools and Equipment Insurance?


Every construction project is unique and calls for specific machinery to complete the job. This can range from heavy construction equipment like bulldozers, excavators, and dump trucks, to midsize equipment like scissor lifts and skid steers, to hand tools like circular saws, jackhammers, and nail guns. Considering the 3,962,222 construction businesses in the U.S. as of 2023, that means there are lots of intricate—and expensive—pieces of machinery being used daily by these professionals.

To keep these pieces safe, every construction company should invest in contractor tools and equipment insurance. This policy covers the repair or replacement of a contractor’s tools and equipment in the event they are lost, damaged, or stolen. This is a very basic definition, so in this article, we delve into additional details that every contractor should know when evaluating insurance coverage.

Tools & Equipment Insurance: A Form of Inland Marine Coverage

“Commercial property insurance is limited to an assigned address within so many feet of that physical location,” says Rachel Pinsonneault, Commercial Lines Staff Underwriter with Central Insurance. “But contractors are out and about working at different properties and different job sites daily, so they need coverage for these expensive pieces of equipment when they are working at a job site.”

This is where Inland Marine Insurance steps in with the ability to cover property as it “floats” between locations.  Sometimes referred to as a floater policy, Inland Marine coverage can be bundled into a property and general liability insurance package policy.  It can cover various types of losses as a result of theft, fire, or vandalism. Covered perils can be specifically named or written on a broader basis, providing coverage for all covered causes of loss except those excluded from the policy. Keep in mind that the insurance coverage does not include normal wear and tear of tools and equipment.  

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To ensure comprehensive coverage for your construction company, It’s recommended to obtain both commercial property and contractor tools and equipment insurance.  Why? Commercial property protects a building you own and the contents inside at the location listed on the policy, while contractor tools and equipment insurance protect your movable items outside of your place of business. So no matter where the job takes you, you’ll be protected.

“This is necessary coverage for all contractors because anything movable can be subject to a loss,” explains Pinsonneault. “The equipment loss could range from as large as an excavator to the smaller tools that are used on a daily basis.”

Learn More: What Commercial Insurance Policy Does My Business Need?

“There are also extensions built into the tools and equipment coverage that include rental reimbursement,” says Pinsonneault. “If a contractor rents equipment or tools that could be picked up by another person on a job site, or if a contractor’s employee uses their own tools, you’ll want to let the underwriter know because these are additional coverage options. This is a huge benefit because it covers the company tools as well as the employee’s, plus it can cover newly purchased property that hasn’t been reported to your insurance agent yet.”

Did You Know? Central Insurance includes debris removal after a loss with coverage up to $5000!

Be Proactive and Preventative With Loss Control

Pinsonneault explains that the most common type of sudden, accidental, and unforeseen damage or loss for tools and equipment is fire, followed by collisions/roll-overs, and theft.  While it’s difficult to nail down concrete figures, the National Equipment Register (NER) estimates the value of construction equipment stolen each year is somewhere between $300 million to $1 billion.

To avoid the potential for theft, it’s highly recommended that contractors secure their equipment at job sites, whether it’s protected with security cameras, secured by locking it up, tagged with a GPS tracker, or listing the equipment on the national equipment registry.  This registry is available for owners of large pieces of construction equipment to be able to register the ID of the machinery.  If it does get stolen and then turns up later, the ID will allow the proper authorities to return the machinery to you.

Site control on a construction project can involve implementing protocols to regulate who can enter and exit the site and what areas they can access. According to Cory Eickholt, Director of Loss Control at Central, ensuring proper site control helps prevent unauthorized individuals from entering potentially hazardous areas and reduces the risk of theft or vandalism to the structure and/or building materials present. 

In addition, Central’s dedicated construction loss prevention team helps current and prospective construction policyholders to evaluate risks and prevent tool and equipment losses before they happen. With a specialized understanding of construction-specific risks and proactive loss prevention strategies, working with a dedicated loss control construction specialist offers many benefits. By leveraging internal expertise and resources, Central helps policyholders confidently navigate the complexities of risk management with confidence, ensuring their assets, projects, and employees are well protected.

Learn More: 5 Top Benefits of a Dedicated Construction Loss Prevention Officer

The Central Difference

Construction and contracting companies can avoid costly insurance claims by working with their independent Central agent to design a comprehensive insurance plan that will provide security, protection, and peace of mind.  At Central, we differentiate through broad product offerings and strong relationships. Our vertical team is focused on construction and dedicated to adding value to our partnerships. 

The information above is of a general nature and your policy and coverages provided may differ from the examples provided. Please read your policy in its entirety to determine your actual coverage available.

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