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Contractor’s Tools and Equipment Insurance
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Contractor’s tools and equipment insurance

If tools or equipment are lost, stolen, or damaged, contractor's tools and equipment insurance helps pay for the repair or replacement of items that are less than five years old.

Why do you need contractor’s tools and equipment insurance?

A form of inland marine insurance, contractor's tools and equipment insurance provides coverage for small tools and equipment.

This policy is sometimes called equipment floater insurance or "tool insurance," and offers ideal coverage for professionals who regularly work at different job sites.

It protects movable tools and equipment wherever you take them, and helps pay for the repair or replacement if they're lost, damaged, or stolen.

It's important to note that contractor's tools and equipment insurance does not cover general wear and tear.

What is covered under contractor’s tools and equipment insurance?

A contractor’s tools and equipment policy offers protection for equipment that moves from place to place, such as hand tools, power tools, and small machinery. This policy typically only covers items that are relatively new and inexpensive.

A covered loss under this policy includes a variety of items and incidents, including:

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Stolen tools

Contractor's tools and equipment insurance can provide reimbursement for tools stolen from a worksite, client's home or business, or storage unit. This policy will also cover items stolen while in transit.

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Broken or damaged equipment

Outside of normal wear and tear, this insurance policy can help cover the cost of replacing a broken tool or repairing a piece of equipment that has been damaged.

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If your tools or equipment happen to be damaged by vandalism or graffiti, contractor’s tools and equipment insurance helps cover the cost of removing graffiti or repairing the equipment.

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Leased or rented items

Some policies include coverage for equipment you rent for a project or while you wait for the repair of damaged equipment.

How much does contractor’s tools and equipment insurance cost?

A business owner calculating the cost of contractor's tools and equipment insurance.

This policy is often affordable, because it only covers items valued under $10,000. Small business owners usually pay an average premium of only $14 per month.

Some factors that could affect the cost of your contractor's tool and equipment policy include:

  • Industry risks
  • The value of your tools and equipment
  • How regularly items are transported
  • Coverage type (named perils or open perils)
  • Property valuation
  • Policy limits, deductible, and claims history
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Who needs contractor’s tools and equipment insurance coverage?

Commercial property coverage usually won't protect your tools in transit or any business equipment stored at a worksite or storage facility. You'll likely need additional coverage, as it is risky to continuously move items and store them off-site.

Contractor's tools and equipment insurance provides benefits for a wide range of businesses that bring tools and equipment to their job sites. Both small construction business owners and independent contractors should consider carrying this coverage, including:

Construction businesses

If your employee's tools are stolen from or vandalized at a client's property, contractor’s tools and equipment insurance covers its replacement or repair cost. 

For example, say an electrician’s power tools are unintentionally damaged by the cleaning crew while left overnight at a client's office. This policy would cover the cost of replacing the broken tools.

Repair and service businesses

Should your computer repair or service equipment be stolen or damaged while on site for a client, contractor's tools and equipment coverage would cover the cost of repairing or replacing the tools.

For example, a computer repair tech has their repair tools and company laptop stolen from the company vehicle while on lunch between off-site client calls, this policy would cover the cost of replacing the stolen items.

Installation businesses

Installation professionals depend on this policy to protect their tools and equipment left at a client's home, office, or other property during a project.

For example, it could cover the cost of replacing an HVAC installer's adjustable wrench set stolen from their van. It also covers damaged and destroyed items, such as a flooring contractor's shipment that was stored outside at a client's property during a windstorm.

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What isn't covered by a contractor’s tools and equipment insurance policy?

Contractor's tools and equipment insurance is ideal for businesses with small budgets, but it's important to remember that the policy doesn't cover every instance of property damage. It's also not designed for certain types of equipment.

Here are a few exclusions businesses commonly face:

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Wear and tear

Items damaged by general wear and tear, such as a hammer drill battery that loses longevity over time, is not covered by contractor's tools and equipment insurance.

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Breakage or misuse

Intentional breakage or deliberate misuse are also not covered by this policy. 

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Older items

Items that are more than five years old are typically not eligible for coverage.

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Expensive items

Items valued more than $10,000 are also not covered by this policy. For example, it'll cover your day-to-day hand tools and light machinery, but not large-scale equipment or top-of-the-line models.

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Vehicles owned by your business should be covered by commercial auto insurance. Additionally, hired and non-owned auto insurance (HNOA) is the right policy for leased, rented, and personal vehicles used for work purposes.

What other policies do small businesses need?

While contractor’s tools insurance is an important part of a risk management plan for many businesses, there are several other small business insurance policies available to fully protect your business from potential financial losses:

General liability insurance: Pays for expenses related to client injury and property damage, along with accusations of slander.

Business owner's policy (BOP): Bundles general liability insurance with commercial property insurance, often at a lower rate than if the policies were purchased separately.

Professional liability insurance: Also known as errors and omissions insurance, this policy helps pay for legal expenses if your small business is sued for unsatisfactory or negligent work.

Directors and officers insurance (D&O): Protects board members and officers if they are sued for a decision they made on behalf of your small business that led to financial loss.

Workers’ compensation insurance: Required in nearly every state for small businesses that have employees, workers’ comp helps cover medical costs related to work injuries.

Commercial auto insurance: Vehicle insurance is required in most states for businesses that own vehicles. This policy covers your legal bills, medical expenses, and property damage if a business vehicle is involved in an accident.

Cyber insurance: Also known as cyber liability insurance, this policy insures against the costs of data breaches and cyberattacks. It covers things like customer notification, credit monitoring, legal fees, and fines.

Other common questions about contractor’s tools and equipment insurance

Review answers for frequently asked questions about contractor's tools and equipment coverage.

How do I get a contractor's tools and equipment policy?

With TechInsurance, you can get quotes from top-rated insurance providers with one easy application. Our licensed insurance agents are available to answer your questions on coverage options and help you find the right types of coverage for your insurance needs.

Once you find the right policies for your small business, you can easily download a certificate of liability insurance for your small business, often on the same day you buy contractor's tools and equipment coverage or another insurance product.

How does contractor’s tools and equipment insurance work?

With contractor’s tools and equipment insurance, you have the option of insuring your tools and equipment for their replacement value or their actual cash value.

Insuring for the replacement cost helps pay for the purchase of a brand-new item to replace any equipment that was lost or damaged at a worksite.

On the other hand, actual cash value refers to the item's current market value and factored depreciation from the number of years the item was used.

Because of this, a policy insured with actual cash value typically costs less.

What is the difference between contractor's tools and equipment vs. inland marine insurance?

Contractor's tools and equipment coverage is designed for items valued at less than $10,000. Meanwhile, specialized equipment or heavy machinery may require inland marine insurance.

If you're looking at expensive equipment, like a bulldozer, backhoe, or excavator, inland marine insurance is likely the appropriate policy. If you only need coverage for smaller, less costly tools, such as lawnmowers, saws, or hand tools, then contractor's equipment insurance should be enough.

There's also equipment breakdown insurance, which is designed for machinery or equipment that suffers a mechanical failure at your business.