What Is Contractors Equipment Coverage?

Contractors rely on specialized tools and machinery, a significant investment. These assets are frequently transported between job sites, exposing them to unique risks not covered by standard business insurance. Contractors equipment coverage offers financial protection for mobile property. It helps businesses recover from unexpected events, ensuring damaged or lost tools and machinery can be repaired or replaced, minimizing disruptions.

Understanding Contractors Equipment Coverage

Contractors equipment coverage, often called an “equipment floater” or “inland marine insurance,” protects tools and machinery used in contracting operations. This specialized policy covers mobile equipment moved between locations, unlike property insurance for fixed assets. Protected assets range from large machinery like bulldozers, excavators, and cranes to smaller items such as hand tools, power tools, generators, and compressors. Coverage can also extend to rented, leased, or borrowed equipment, temporary structures, and employee-owned tools.

This policy covers common perils that can result in financial loss for contractors, including theft, vandalism, fire, and natural disasters like windstorms, floods, and earthquakes. It also protects against damage sustained during transit between job sites or while equipment is in storage. Some policies may include benefits for debris removal after an accident or costs to expedite a project if a covered loss causes delays.

Common Coverage Limitations

While contractors equipment policies offer broad protection, they contain specific exclusions. Damage from normal wear and tear is typically not covered, as this is an inherent part of an asset’s aging and usage. Mechanical breakdowns or electrical malfunctions are generally excluded unless added through an endorsement like equipment breakdown insurance.

Other common exclusions include damage caused by rust, corrosion, or mold, which are maintenance-related issues. Damage from poor maintenance practices or intentional acts by the insured or their employees is also typically not covered. Policies usually define a geographical scope; damage or loss outside these limits may not be covered. Certain specialized items like contraband, watercraft, aircraft, or vehicles designed for highway use are routinely excluded.

How Policies Are Structured

Contractors equipment policies are structured with elements that determine how coverage applies and claims are paid. Deductibles represent the amount a contractor must pay out-of-pocket before coverage begins. These can vary, sometimes applying per item or per occurrence. Policy limits, both overall and per individual item, establish the maximum amount the insurer will pay for a covered loss.

A key aspect of policy structure involves how equipment is valued for claims, typically defined as Actual Cash Value (ACV) or Replacement Cost Value (RCV). ACV policies pay the replacement cost of damaged property minus depreciation, reflecting the item’s market value. This option often results in lower premiums but may not provide enough funds for a new replacement. RCV coverage pays the cost to repair or replace the damaged item with a new one of like kind and quality, without depreciation. While RCV policies usually have higher premiums, they offer more comprehensive financial recovery, especially for newer equipment.

Policies also differentiate between “scheduled” and “blanket” coverage. Scheduled coverage requires listing each specific piece of equipment with its own insured value, typically for larger, more expensive items, providing precise coverage for high-value assets. Blanket coverage provides a single, overarching limit for all covered equipment, often used for smaller tools or newly acquired items with a grace period before individual scheduling.

Differentiating from Other Insurance

Contractors equipment coverage serves a distinct purpose within a business’s insurance portfolio, differing from other common policies. Commercial Property Insurance primarily covers buildings and their contents at a fixed business address. This policy typically excludes coverage for mobile equipment regularly transported between job sites, which is what contractors equipment insurance protects.

Commercial Auto Insurance covers vehicles licensed for road use and any attached equipment while in transit. However, it generally does not cover specialized mobile equipment, such as excavators or forklifts, that operates off-road or is loaded onto a vehicle for transport. Commercial auto policies focus on the vehicle itself, not the machinery it carries or functions independently.

General Liability Insurance provides broad coverage for third-party claims of bodily injury or property damage a business might cause to others. This policy protects the contractor from claims arising from their operations, premises, or products. However, general liability does not cover damage to the contractor’s own property or equipment, which falls under specialized property coverages like contractors equipment insurance.