Contractor’s Tool and Equipment (Inland Marine) Coverage is insurance coverage for small hand tools, power tools, motorized equipment, and safety gear. Tool coverage can also extend to specialized rental equipment, certain materials prior to installation, and include minor pollution coverage for the costs of cleanup and removal of pollutants (e.g. gas leaked from an overturned backhoe).
This coverage is usually assumed to be covered by a contractor’s general liability or even their auto insurance, but many contractors are surprised to learn that their most valuable commercial assets have no coverage at all. Sadly, the contractor usually learns this after tools have been stolen and they are looking for help replacing them.
Why Does A Contractor Need Tool Coverage?
A contractor’s tools are the most important asset they have. The project simply cannot be done without the small hand tools in the tool box, or even the powertools a contractor accumulates over their years in business. Whether it is a skilsaw or a forklift, it is critical to ensure the resources that make the job successful are guarded against theft, vandalism, or loss due to fire, wind, hail, or water. General wear and tear is not included in any coverages.
The tool and equipment policy is designed to cover mobile property wherever it may be located and can be written as replacement cost coverage or actual cash value, depending on the needs of the contractor and the equipment being covered.
What Types of Tool Coverage Are Available?
Replacement Cost Coverage (RC) is a predetermined amount determining the value of tools and equipment, establishing in advance the amount an insurance company will pay in the event of a covered loss.
Actual Cash Value Coverage (ACV) pays for damaged or stolen property at depreciated value. Depreciation is calculated by determining the replacement cost of the loss and subtracting value based on the age and type of tool as well as assumed wear and tear.
Determining which of the above coverages to select when choosing a tool coverage policy can be based on the tools and equipment being covered as well as the requirements of a bank or leasing company, if the equipment is financed. Be sure to inform the insurance agent if the equipment has a loan attached to it, or is being rented from a location with insurance requirements. This will ensure the limits of the policy match what is required in the lease or loan documents.
Whether equipment insurance is a requirement or a construction company simply wants to ensure their tools are safe, having a tool and equipment policy protects profitability by guaranteeing theft won’t be a major financial set back.
How Much Does Tool Coverage Cost?
Tool coverage costs vary depending on which coverage is needed. To cover basic contractor hand tools the price of a policy ranges from $199-$600. Larger equipment coverage premiums vary greatly based on the year, make, model and replacement value of that equipment.
|Tool/Equipment Examples||Coverage Amount||Cost*|
|Hand Tools Under $1,500 in Individual Value||$5,000 Blanket Coverage||$199|
|2018 Bobcat||$25,000 RC||$250|
|2018 Vermeer Wood Chipper||$65,000 ACV||$826|
|2013 John Deere Excavator||$150,000 RC||$1,090|
*Cost can vary based on coverage amount, coverage type, tool or equipment type, security measures, insurance requirements.