Contractors Equipment Coverage
In the insurance industry, tools, equipment, and machinery used by contractors are called contractors equipment. Examples of such equipment are hand tools, backhoes, scaffolding and portable generators.
Contractors equipment differs from most types of business-owned property in that it is mobile. Unlike, say, a building or office contents, contractors equipment does not remain on your premises. It is transported from one job site to another.
Contractors equipment may be damaged by a variety of perils. These may include lightning, landslides, floods, and hailstones. Some pieces of equipment may be particularly valuable. If damaged or destroyed, such items may be costly to repair or replace.
Not Covered by Standard Property Policies
A standard commercial property policy is designed to cover property that is fixed at your business location. It covers your business personal property, including equipment and machinery, situated on your premises or within a short distance thereof (such as 100 feet). It does not cover tools, equipment or other property located away from your premises. You can protect your business against equipment losses by purchasing contractors equipment coverage.
Contractors Equipment Coverage
Contractors equipment coverage is often referred to as a "floater" since it is designed to cover movable property. It can be written alone, added to a property policy, or combined with other coverages under a package policy.
Many insurers provide contractors equipment coverage using preprinted policy forms published by ISO or AAIS (an insurance advisory organization similar to ISO). Some insurers have developed their own policy forms.
Blanket or Scheduled Coverage
Contractors equipment forms may provide scheduled coverage, blanket coverage, or a combination of the two.
Scheduled coverage applies only to the items listed in a schedule. A list of covered property may be attached to your policy or "on file" with the insurer. "On file" means that your insurer is maintaining a list of covered items based on information you have provided.
When insurance applies on a blanket basis, the policy covers all items that meet the definition of "covered property". These items are covered whether or not they are not listed on a schedule.
Many insurers provide a combination of scheduled and blanket coverage. When you purchase the policy, you provide your insurer a list of tools and equipment you want to insure. The list typically includes the make, model, serial number, and value of each item. In addition to the scheduled items, your policy may cover unlisted items subject to a specified limit.
Value and Coinsurance
A contractors equipment policy may pay losses based on either of two values: the actual cash value of the damaged property, or the cost or repair or replace it. Coverage based on replacement cost affords better, but costlier, protection than coverage based on actual cash value.
Most contractors equipment policies cover damage to insured property caused by a broad range of perils, including flood and earthquake. Policies generally cover "all risks," meaning all perils not specifically excluded. Many policies exclude the following perils:
- Nuclear hazard
- Acts by a civil authority
- Criminal acts committed by you or an employee
- Corrosion, fungus, rust, mechanical breakdown, electrical injury, and wear and tear. However, ensuing loss by an insured peril may be covered.
Virtually all contractors equipment policies include a deductible that applies to each loss. The deductible may be a flat dollar amount or a percentage of the value of the damaged item.
Contractors equipment is subject to theft. This is especially true of heavy equipment, which is often left at job sites until projects are completed.
Some insurers will waive all or a portion of the deductible following a theft loss if the stolen item is equipped with a GPS device or is registered with the National Equipment Register.
Like many contractors, you may lease equipment from someone else. An equipment lease typically makes you, the lessee, liable for damage to the equipment that occurs during the term of the lease. Fortunately, many contractors equipment policies include coverage for equipment you lease from others.
You may also own equipment that you lease to others. Some contractors equipment forms cover damage that occurs while your equipment has been leased to another party. If you lease the property to others, make sure your policy includes this coverage.
Many contractors equipment policies include coverages or extensions not addressed above. Some of these are listed below. Each may be subject to special limits or restrictions.
- Newly purchased property
- Employees' tools
- Rental expenses that continue when damaged equipment is no longer usable
- Pollution cleanup
- Fire department service charges and the cost to refill equipment
- Income loss. This coverage may be available via an endorsement.