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Proper Tool Insurance for Small Contractors

March 31st, 2023 | 3 min read

By Daniel J. Middleton

Your tools and equipment are the lifeblood of your work. Without them, you can’t finish the job and collect payment.

If some of those tools go missing, sure, you can replace a few if you had to on the fly.

But what if your Snap-on tool chest was rolled out of your garage along with everything in it? What if your hand tools were stolen from the job site or destroyed in a fire?

If you’re here, these problems have occurred to you or someone you know.

You want to insure your tools but aren’t sure where to start.

As an agency smack dab in the middle of a blue-collar village, we have helped many contractors with insurance. We’ve seen folks like you start off with the basics, like general liability or commercial auto insurance, but hold off on insuring their tools.

As business increases, almost all of these contractors eventually come back around to insure their equipment and tools. We can help you prioritize which tools to cover based on your unique trade.

We know that learning about commercial insurance wasn’t the reason you got into your line of work.

We don’t blame you!

Insurance can be complicated in the same way calculating an 88.6-degree miter cut for crown molding can be for most insurance agents.

In this article, you’ll learn when and how to properly insure your tools and equipment and why it’s necessary.

When Purchasing Tool Insurance is Necessary

Few small contractors have a plan in place for their equipment and tools in case of theft or fire before the job is completed.

The problem is that that type of loss happens at the most financially inopportune time imaginable—like when you’re a third of the way in on a large project—and leaves you scrambling for a solution.

Like many contractors, you accumulated your tools over time. Makes sense. You add to your collection of tools and equipment as you can afford it or as unique ones are needed to complete certain jobs.

We’ve yet to meet a contractor who went out and purchased $50,000 worth of tools the same day they ordered their starter set of business cards from VistaPrint.

Yet, after a loss like a fire, $50,000 worth of tools can be gone in a moment, leaving you to replace them one by one.

Unless you insure them, at which point you can go out and buy them all again!

If you amassed a sizeable collection of tools and equipment that would be difficult to replace in one fell swoop, it’s time to purchase tool insurance.

Misconceptions About Tool Insurance

From our experience, one of the main reasons why contractors hold off on getting insurance for their tools is because they incorrectly assume their home or renters insurance policy will pay for those tools in the event of a loss.

The truth is, any of your possessions that are used to generate income are excluded from coverage on most personal insurance policies or have extremely limited coverage at best.

Others believe that their tools are included as part of their business liability policy.

Many well-meaning contractors learned the hard way that it isn’t so. General liability does not insure any of your possessions, tools, computers, or other equipment.

Some carriers will allow you to add a property coverage element to a general liability policy.

If you have a general liability policy but have never been asked about the value of your tools, it’s fair to say that you’re not insured for any loss associated with those tools.

That’s why it is so critical to be diligent and make sure they are appropriately protected by the right policy.

How Do I Properly Insure My Tools and Equipment?

Five essential tools for small contractors with average replacement costs.Properly insuring your tools begins with knowing how much they’re all worth. Knowing their value is the first step.

The next step is to determine the right policy to add them to. Should you include the tools on your liability policy? Or is it better to start a separate one?

Adding the tools to your liability policy is usually the most efficient option.

Having the proper tool insurance will keep you in business and help you avoid long delays if those tools go missing in the middle of a job.

And you won’t need to tap your personal financial resources to rebuy expensive tools and equipment after a loss.

If you don’t insure your tools, you bear the full financial responsibility and are merely biding time until the unexpected happens, which could occur next year, next month, or next week.

What contractor wants to go on Facebook Marketplace, Craigslist, or pop in at springtime garage sales for cheap, used alternatives?

Seeing your business flourish and avoiding headaches is paramount to your peace of mind.

While we can’t help with the projects your clients botched—which they hired you to fix—we can help assure that your tools will be available to do the job.

Each trade has tools and equipment that are unique. A flooring contractor will have different tools than a landscaper. We have a proven method of quickly determining the amount of insurance needed to cover these business essentials.

To get started, call 315-635-2095 to speak with a Horan insurance specialist. Or click the Get a Quote button below.

To learn about another vital policy for your business, read “Why Must CNY Contractors Have Workers Comp Insurance?

Daniel J. Middleton

Daniel is an accomplished content creator. He has been working in publishing for almost two decades. Horan Companies hired Daniel as its content manager in November 2022. The agency entrusted its messaging to him. Since then, Daniel has written insurance articles, service and pillar pages, and more. All in an effort to educate CNY readers. He's helping them understand the world of insurance so they can make informed decisions.