Why Contractors Need More Than Commercial Property Insurance for On-the-Job Equipment

Many contractors are under the impression that their Commercial Property insurance covers all of their business assets, including tools and equipment. You might think that a skid steer, laser level, generator, or table saw is business property, so it should be covered, right? Not necessarily.

The key difference is where your property is located. A standard Commercial Property policy protects property at a fixed location, such as your office, warehouse, or shop. But in reality, you aren’t working at one location. Your equipment is constantly moving from one project to the next, making it vulnerable to risks a standard Property policy typically isn’t designed to cover.

That's why you need a specialized policy to cover the tools and equipment you use on the job. That coverage is Contractors Tools & Equipment insurance.

What Does Commercial Property Insurance Cover?

Commercial Property insurance is an integral component of any contractor's insurance portfolio. It typically helps protect your business premises and the property kept there, including:

• Your building (if you own it)
• Office furniture and fixtures
• Computers and electronics
• Inventory and supplies
• Equipment stored at your insured location

If a fire or other covered event damages your building or permanently stored business property, your Commercial Property policy generally will respond. The challenge for contractors is that their most valuable assets often spend very little time at that insured location.

The Challenge: Your Equipment Doesn't Stay Put

Think about a typical workday. Your crew loads generators, compressors, power tools, ladders, laser levels, and other equipment into a truck early in the morning. Throughout the day, that equipment may be:

• Transported between multiple job sites
• Left temporarily at a construction site
• Stored overnight in a trailer
• Moved between subcontractors
• Used at several different customer locations

Those exposures differ greatly from those of a desk or filing cabinet that never leaves your office.

If your equipment is stolen from a trailer, damaged while being transported, or destroyed at a job site, your Commercial Property policy will typically provide limited or no protection at all because the loss occurred away from the insured premises.

Where Contractors Tools & Equipment Insurance Comes In

Contractors Tools & Equipment insurance is specifically for property that moves, providing coverage if your tools or equipment are stolen or damaged. The policy can be written as replacement cost coverage or actual cash value, depending on the contractor's needs and the equipment being covered. Replacement cost coverage helps pay to replace covered tools and equipment with new items of similar kind and quality, without reducing the payment for depreciation. Actual cash value coverage reimburses you for the depreciated value of covered tools and equipment, taking into account their age, condition, and normal wear and tear.

Instead of protecting equipment only while it’s sitting at your business location, Contractors Tools & Equipment follows your equipment wherever your work takes it, subject to the policy’s terms and conditions. Depending on the policy, it may help protect:

• Hand tools
• Power tools
• Generators
• Compressors
• Welders
• Surveying equipment
• Skid steers
• Excavators
• Backhoes
• Trailers
• Rented or borrowed equipment (if scheduled or included)

Coverage typically extends to equipment while it's on a job site, in transit, temporarily stored away from your business location, or being loaded or unloaded.

Every policy is different, so it's important to understand what is and isn't covered.

Real-World Situations Contractors Face

The value of Contractors Tools & Equipment coverage becomes easier to understand when you consider everyday jobsite scenarios.

• Your trailer is stolen overnight. Inside are thousands of dollars’ worth of saws, drills, nail guns, and specialty tools needed for tomorrow's project.
• A skid steer overturns while being unloaded. The equipment requires extensive repairs before it can return to service.
• A generator is vandalized at a remote job site. Replacement parts delay the project and create unexpected costs.
• A laser level disappears during a commercial remodel. The missing equipment slows production until you can get a replacement.

None of these situations involve damage to equipment in your office or warehouse, yet each can significantly impact your ability to complete projects and generate revenue.

It's About More Than Replacing Equipment

The financial impact of losing equipment often extends well beyond its replacement cost. Without essential tools or machinery, you may experience project delays, missed deadlines, additional equipment rental expenses, overtime costs, lost productivity, and unhappy, disgruntled customers.

For many contractors, getting equipment back into service quickly is just as important as replacing the equipment itself.

Property Insurance and Tools & Equipment Coverage Work Together

One policy doesn't replace the other. Think of them as protecting different parts of your business.

Commercial Property insurance helps protect your fixed business location and the property kept there, while Contractors Tools & Equipment insurance helps protect the equipment that travels from one project to another and spends its days where the work is happening.

Together, they create a more complete insurance program for contractors whose businesses depend on mobility.

Review Your Equipment Values Regularly

Many contractors purchase new tools and equipment throughout the year but never update their insurance. Ask yourself the following:

• Have you purchased new equipment in the last 12 months?
• Are your scheduled values still accurate?
• Are rented or borrowed tools covered?
• Does your policy reflect how and where your equipment is actually used?

A quick annual review with a construction insurance professional like CCIS can help identify gaps before a loss occurs.

Frequently Asked Questions About Contractors Tools & Equipment

Q. Does my Commercial Property policy cover my tools while at a customer’s location?

A. No. You need specialized coverage provided by a Contractors Tools & Equipment policy.

Q. Is general wear and tear covered by a Contractors Tools & Equipment policy?

A. General wear and tear is not a covered loss under the policy.

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 policy's terms and conditions will determine whether coverage exists and the nature of any potential benefits.