Tools and Equipment Coverage
Tools are the contractors’ lifeblood, so any money paid for insurance policies is well spent
Contractors generally move their tools from one job site to another. Equipment is insured under an inland marine rider, which is designed to cover items wherever they travel or are located. Your heavy equipment, like table saws or laminators, might be screwed down to the floor to prevent movement or vibration. Those objects are classified as property, and may be insured for significantly smaller premiums than the tools you regularly transport.
Most small businesses take out comprehensive policies, known as Business Owners Packages (BOPs) or Artisan Contractor, for general property and liability protection. These policies usually include extras, such as business interruption and tools. Larger companies, with more than $1 million in revenues, generally buy common policy packages (CPP) insurance, which is sold a la carte.
Bigger ticket items—like generators, jackhammers, compressors, miter boxes, pole jacks and back hoes—are listed separately on a schedule, according to name, make, model, serial number and cost. Smaller articles—such as hammers, air guns, punches, wrenches and pneumatics valued at less than $500 apiece—are lumped, or unscheduled. Don’t forget computers and construction calculators. It actually is cheaper to insure your expensive tools one by one, not grouped together. For example, $23,000 worth of scheduled equipment costs roughly the same as $10,000 in unscheduled items
Two years ago, Bob DuBree, a North Wales, Pa.-based contractor, had $2,000 of equipment stolen from a truck in Philadelphia. He was relieved that all the drills, circular saws and other articles were covered fully by insurance. “Those can quickly add up,” Kinsey says. “Most builders don’t realize the total amounts, until they go to replace them.”
Tools can be stolen, damaged or destroyed. “Every case is different,” Kinsey explains. “Who did what, and when?” While thefts, vandalism and accidents usually are covered, insurers will not reimburse for willful neglect or use and abuse.
A qualified workman is presumed to do a job carefully. So, dropping tools from a roof or job site would count as neglect. The same goes for running over them or backing a truck into them. But if the tools have been left overnight in a building that catches fire, that event probably would be construed as an accident.
If tools are lost or stolen, make sure to file a police report as soon as possible. Insurance companies require an official statement to a public authority.
All tool insurance reimburses on an actual cash basis, rather than replacement cost. You will receive the amount you actually paid out when you purchased the equipment, minus depreciation.
Remember, business owners can generate good will with employees by insuring their tools as well. “You don’t want employees to become disgruntled because their tools have been stolen, preventing them from working,” Kinsey adds.