Does Contractor Insurance Cover Tool Theft?

Tool and equipment theft is one of the biggest problems contractors and construction professionals face. Insurance reports to the Insurance Services Office (ISO) reveal that theft is the single most common cause of loss for heavy equipment.

If your tools or equipment get stolen, the last thing you want to do is pay out of pocket to replace the missing items. Particularly the high value ones.

Luckily the right contractor insurance can cover theft.

But you’ll need to have the right policies in place. Because theft of your tools or equipment isn’t covered by every policy.

Does General Liability Cover Tool Theft?

Most contractors carry general liability coverage to protect them from the most common risks they face in the construction industry. General liability (GL) is there in the event of third-party bodily injury and property damage. If you accidentally damage or destroy someone else’s heavy equipment or high-value tools, your GL may cover the loss.

Unfortunately, general liability typically won’t cover your losses if your own tools and equipment are lost or stolen.

A standard GL policy won’t cover your tools against theft.

So how do you insure your valuable equipment?

Here are a few ways.

Inland Marine Coverage for Tools in Transit

The name can sound a bit misleading but don’t be fooled - inland marine has nothing to do with boats or anchors and everything to do with your construction tools. In fact, we more commonly refer to this as tools and equipment insurance.

Inland marine insurance coverage is designed to protect property in transit over land and certain types of moveable property. Like construction and contracting equipment.

If your tools are stolen from your work auto as you transport them back and forth to the project site, or while they’re being temporarily warehoused by a third-party, tools and equipment coverage will typically cover your loss.

If you are constantly transporting your high-value construction equipment and tools between project sites, inland marine coverage is a great way to protect yourself from the risk of tool theft.

But what about tools and equipment that you leave on the job?

Builders Risk Coverage for Equipment on a Project Site

Another contractor insurance policy that may cover your construction equipment and tools is a builders risk policy.

Builders risk insurance is designed to protect the owner of a construction project against losses caused by fire, vandalism, theft, explosions, and other perils that could occur during the course of construction.

That coverage generally includes materials, fixtures, and equipment being used in the construction or renovation of a structure.

Many builders risk policies are written on an “all perils” basis, meaning any loss is covered unless it’s specifically excluded by the policy. But read your policy carefully; sometimes heavy equipment such as bulldozers and ditch diggers are specifically excluded. In this case, a contractor’s equipment floater may be the right solution to fully insure your heavy equipment against theft or loss.

Builders risk policies are generally taken out by a project owner or general contractor, but subcontractors may be covered under the owner’s policy. Talk to your insurance provider to find out if you need to take out your own policy or if you’re covered under someone else’s.

Protecting your tools against theft doesn’t have to be expensive. Often times you may get a discount for combining multiple policies with your insurance provider. Which means adding an inland marine (tools and equipment) policy to your existing contractor general liability policy could be more affordable than you think.

Don’t gamble with the equipment you’ve invested in. Protect your tools and equipment with the right insurance coverage and you’ll be prepared in case someone ever steals the things you need to get the job done.

Smiling Male Contractor

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