Tools and Equipment Insurance: Coverage, Cost & Quotes

Why your general liability and commercial property policies don't cover tools at the jobsite

Contractors often assume their general liability policy or commercial property policy covers tools stolen from a van or jobsite. Neither one does the job.

General liability is third-party coverage. It pays when someone else claims your work caused bodily injury or property damage. It does not pay you for your own stolen drill, lost laser level, or crushed compressor.

Commercial property insurance is built around a fixed business location. It typically covers equipment that stays at a covered premises — your shop, warehouse, or office. The Hartford distinguishes commercial property, which covers equipment at a fixed location, from contractor's equipment insurance, which is designed for mobile equipment that moves between jobsites, travels over land, or sits in temporary storage offsite.

Tools and equipment insurance is a form of inland marine coverage. It is first-party property coverage that pays the contractor for covered loss to the contractor's own tools and equipment — whether owned, leased, rented, or borrowed — at jobsites, in transit, or in temporary storage.

What property can be covered

• Owned tools and equipment — hand tools, power tools, heavy machinery
• Rented, leased, or borrowed equipment under a written agreement
• Employee-owned tools and work clothing (subject to sublimits)
• Equipment in transit between jobsites
• Tools in temporary storage away from a fixed business location

Travelers says its inland marine contractors' equipment insurance covers tools, clothing, and heavy equipment in the contractor's possession at the policy effective date, plus tools and equipment purchased, rented, leased, or borrowed after the policy starts.

Losses this coverage is designed to pay for

Tools and equipment insurance addresses the causes of loss that hit contractors most often: theft, fire, vandalism, accidental damage, weather events, and losses while property is in transit.

Theft is the biggest problem. Travelers states that construction companies lose between $300 million and $1 billion per year to heavy equipment theft. Smaller tool theft from vans, trailers, and jobsites is even more common but less reported.

Covered causes of loss

• Theft from vehicles, trailers, jobsites, and temporary storage
• Fire and vandalism at the jobsite
• Accidental damage (a forklift backs into a generator, a tool falls from scaffolding)
• Weather events such as floods, lightning, and windstorms
• Losses while tools are in transit
• Damage to rented or leased equipment the contractor is responsible for under a written agreement

Travelers lists theft, vandalism, fire, accidents, floods, lightning, and other natural disasters as covered causes, with the policy specifying risks or equipment that are not covered.

Scheduled vs. unscheduled equipment — which items need to be listed

Carrier programs split tools and equipment coverage into two categories: scheduled property and unscheduled property. Understanding the difference prevents claim denials on your most expensive items.

Scheduled items: individually listed equipment

Scheduled equipment means specific high-value items are listed on the policy with make, model, serial number (when available), and replacement cost value. Each item has its own coverage limit.

Athos explains that in its equipment floater program, scheduled equipment is for single items with replacement cost over $5,000, while unscheduled equipment is for items with replacement cost of $5,000 or less. Items above that threshold must be scheduled or they are not covered under that program.

Unscheduled items: blanket limit for smaller tools

Unscheduled equipment falls under a blanket limit. You do not list every hammer, drill, or saw individually. The blanket limit caps total recovery for all unscheduled items combined.

UFG's contractor equipment endorsement shows how sublimits work within the blanket. Example sublimits include $100,000 for rental equipment (scheduled), $25,000 for rental reimbursement, $5,000 for spare parts and fuel, $5,000 per occurrence for employee tools with a $10,000 aggregate, and $10,000 for rental equipment (unscheduled).

Check whether your item needs scheduling

The scheduled vs. unscheduled decision is the most common buying mistake in this coverage. Use this tool to check whether a specific piece of equipment needs to be individually listed on your policy.

Coverage gaps that cause claim denials

Buying a tools and equipment policy does not guarantee every loss gets paid. These are the gaps that cause the most claim problems for contractors.

Wear and tear, rust, and corrosion

Tools and equipment insurance covers sudden and accidental loss. It does not cover gradual deterioration. NEXT says tools and equipment insurance usually will not cover corrosion, rust, wear and tear, or costs beyond the policy limit. A saw blade that dulls over time is maintenance. A saw that is stolen is a covered loss.

Actual cash value vs. replacement cost

Many policies settle claims at actual cash value — what the item is worth today after depreciation. A five-year-old $3,000 laser level might pay out $1,200 at actual cash value. The Hartford says many policies provide actual cash value as standard and replacement cost enhancements may not extend to unscheduled equipment or partial losses.

Athos tells applicants to value equipment at replacement cost including sales tax, not fair market value based on depreciation. Ask whether your policy pays replacement cost or actual cash value before a loss happens.

High-value items not scheduled

If you own a $12,000 mini excavator and it is not listed on the schedule, some programs will not cover it at all. The blanket unscheduled limit may be too low, or the program may exclude items above the threshold entirely.

Employee-owned tools with low sublimits

Employee tools may be covered, but the sublimit can be surprisingly low. One carrier program example shows $5,000 per occurrence and $10,000 aggregate for employee tools. If three employees each lose $4,000 in tools from the same theft, the $10,000 aggregate may not cover all of it.

Rented equipment without a separate limit

Rented equipment may need its own sublimit or endorsement. If you rent a $50,000 boom lift and your rented equipment sublimit is $10,000, you have a $40,000 gap. Check the rental equipment limit before signing the rental agreement.

Check which gaps apply to your business

Answer five questions about how you store tools, whether you rent equipment, and your highest single-item value. The tool flags which coverage gaps apply to your situation.

What tools and equipment insurance costs and how carriers price it

NEXT publishes a starting price of $19 per month for tools and equipment insurance as an add-on to general liability for some low-risk businesses. That is a carrier marketing starting price, not a guaranteed quote for every contractor.

Your actual premium depends on the total value of tools and equipment you need to insure, plus several other factors carriers ask about.

What carriers ask about when pricing this coverage

• Total replacement cost of all tools and equipment
• Highest single-item value (determines scheduling needs)
• Trade and jobsite exposure — electricians, HVAC contractors, plumbers, and tree service companies each carry different equipment
• Storage security — locked trailer, job box, secured yard, or open jobsite
• Deductible amount — higher deductible lowers the premium
• Valuation method — replacement cost coverage costs more than actual cash value
• State and territory
• Prior tool and equipment losses
• Add-ons such as rental reimbursement, continuing lease charges, or extra expense coverage

NEXT lists cost factors including industry, business operations, business size, location, coverage needs, and policy limits.

The marketplace compares your account with carriers from 400+ carrier and market options that insure contractor tools and equipment. Licensed support is available in 22 states.

How to document your tools so claims get paid

Carriers can deny or reduce claims when the contractor cannot prove what was lost or what it was worth. Athos tells applicants to keep an updated equipment inventory and value equipment at replacement cost including sales tax because remembering all assets after a theft or fire is difficult and creates claim issues.

The inventory does not need to be complicated. A spreadsheet with the right columns is enough. The key is keeping it current and storing it somewhere the loss cannot destroy — cloud storage, email to yourself, or a shared drive.

Download a ready-made inventory template

This template includes columns for every detail carriers need for scheduling and claims proof: item name, category, make, model, serial number, purchase date, receipt cost, replacement cost, photo link, owned/rented/borrowed status, and scheduled flag.

Compare carriers that insure your tools and equipment

Tools and equipment coverage is available from many carriers across trades — electricians, HVAC contractors, carpenters, plumbers, painters, landscapers, masonry contractors, and drywall contractors all carry mobile equipment that needs coverage.

Submit one quick form. The marketplace compares your account with carriers that insure your kind of work, and licensed insurance professionals can review the options.

Submit one quick form. The marketplace compares your account with carriers that insure your kind of work, and licensed insurance professionals can review the options. Get a smart match or call (888) 698-7698 to talk to a licensed representative.