Whether you own, rent or lease equipment for your construction business, some form of contractor’s equipment insurance is necessary to protect your investment and reduce your loss in the event of damage to your tools or machinery. However, before you purchase any contractor’s equipment policy, it’s important to review it carefully. In addition to understanding your deductible and coverage limits, pay particular attention to the following sections.
The Inventory
If a backhoe, forklift, jackhammer or any other construction tool is left off of the inventory and later becomes damaged, you could have problems filing a claim. Take the time to double check that the initial schedule of values is complete and accurate, especially if the policy includes a provision specifically excluding property not listed at the time of underwriting.
The Limit of Liability
It’s often best to obtain contractor’s equipment insurance coverage that includes blanket liability. This means it covers the equipment (and their values) listed in the inventory when you purchase the policy as well as insuring newly acquired equipment from date of purchase. Make sure any sub-limits are sufficient to cover your potential investment.
Equipment Valuations
Choose a policy that will provide you with the replacement cost of damaged equipment or an agreed upon amount. It’s generally best to avoid reimbursement at actual cash value, though this may not be possible with older equipment.
Coverage for Rented Equipment
If you’re in the middle of a project and need to rent a boom lift, you don’t want to discover your contractor’s equipment policy doesn’t cover borrowed equipment. Ask for a policy that covers all rented or borrowed tools up to a sub-limit you can increase or decrease based on the item.
Co-Insurance
Co-Insurance protects the insurer in the event that you’ve undervalued your equipment. It’s typically 80 percent, though that amount may vary. Make sure you understand your risk and value your equipment carefully when buying your policy.
Equipment Transit
Make sure the policy includes full coverage on your equipment during transit to and from the jobsite. Coverage may be underwritten with a sub-limit or be subject to the policy deductible.
Continuing Expenses Reimbursement
If equipment is damaged and you need to rent a replacement to continue your project, you don’t want to be on the hook for the cost. Some contractor’s insurance policies will reimburse you for rental expenses when you file a claim. Others will also cover overtime wages ,if needed to complete the project, and transportation of the rented equipment to your jobsite.
Exclusions
Policy exclusions vary by company. Common exclusions include damage caused by flood, earthquake or war as well as normal wear and tear, rust and corrosion. Your contractor’s insurance policy may also exclude equipment stored or operated underground, boom crane collapse, and equipment not included in the original inventory. Exclusions may be found anywhere in the policy wording, not just in the designated exclusion section, so review the entire document carefully.
Do you have questions about construction industry insurance? Whether you need a builder’s risk, business auto, commercial general liability or other contractor’s policy, we are here for all your construction-related insurance needs.
