As a construction business manager or contractor, you invest a substantial amount of money into your equipment, and you depend on functioning equipment in order to fulfill contractual obligations and earn money. If a piece of vital equipment is damaged, lost or destroyed, you may be looking at significant replacement costs, as well as project delays and lost income. Construction equipment insurance provides important coverage when events like these occur.
What is construction equipment coverage?
Also called contractors equipment insurance, construction equipment insurance can provide coverage if a covered piece of equipment is lost, damaged or destroyed in a covered peril. The policy will provide a payout in accordance with the policy terms.
Some policies may also cover certain related costs, such as lost income or cleanup and debris removal after a large piece of equipment is destroyed.
The payout from construction equipment insurance can help contractors and construction businesses recover from their loss, helping to avoid project delays while keeping costs under control.
What are the main construction equipment risks?
Equipment could be damaged in a variety of scenarios, both during work or in between shifts. A few ways your construction equipment could be lost, damaged or destroyed include:
- Theft or vandalism. When construction crew members go home (such as on holidays or at night), criminals may target construction sites. Thieves may steal equipment to sell it, while vandals may damage any business equipment they can get their hands on. Construction site security can help prevent losses, but crime will still remain a risk at almost every construction site.
- Storm damage. Large hail stones, lightning strikes and strong winds are all capable of damaging construction equipment.
- Fire damage. Both localized fires and wildfires can pose a major threat to construction equipment.
What Construction Equipment Insurance Covers
Construction equipment coverage will vary depending on the policy terms and insurance carriers, but, generally, construction equipment insurance covers perils such as:
- Fires
- Accidents
- Lightning
- Hail and windstorms
- Theft
- Vandalism
Construction equipment insurance can also cover multiple types of equipment, including:
- Heavy equipment, such as cranes and forklifts
- Handheld tools and power tools, such as drills and saws
- Personal protective equipment, such as hard hats and safety goggles
- Tech tools and other types of business equipment, such as drones
- Ladders, wheelbarrows and other tools
Why should contractors purchase construction equipment insurance?
Construction is a risky industry. Contractors often have to buy insurance coverage to meet state requirements and contractual obligations. When you’re trying to reduce your overhead costs, you may not want to spend money on additional insurance coverages – but that may end up costing you much more in the long run.
How could stolen or damaged equipment impact your construction projects and budget? Consider the following scenarios:
- Your crew is working on a large project to construct an office building. Since there have already been some project delays due to bad weather, you have a tight schedule to follow to ensure you complete the project on time. Unfortunately, when another storm hits, lightning strikes your crane, making it inoperable. Now, you need to buy a new crane and are facing project delays. If you have construction equipment insurance, though, you can file a claim.
- You have a security company patrol your construction site at night. However, some people are still able to sneak onto the premises. Before the security guards see them, they start a fire that ends up damaging several pieces of equipment, which leads to project delays. With construction equipment insurance, you can file a claim to help get the project back on schedule.
Is your insurance coverage sufficient?
To make sure you’re fully protected against various scenarios, you should review the details of your coverage with your insurance advisor. Still, there are a few things you should consider:
- Does coverage provide replacement cost or actual cash value? Since construction equipment depreciates, there may be a significant difference between the actual cash value of your equipment and its replacement cost. If your policy provides actual cash value coverage, your payout may not be enough to cover the cost of buying a new piece of equipment. Replacement cost coverage may cost more, but it can provide more robust coverage.
- What’s the deductible? If you suffer a loss, you’ll be responsible for the cost of any deductible, so make sure you’re comfortable with the deductible amount for your policy.
- Which pieces of equipment does the policy cover? You may need to secure coverage for expensive pieces of equipment like heavy machinery. But, it’s also important to find out whether equipment you purchase after the policy goes into effect will receive coverage automatically, or if you’ll need to report the equipment to the insurer and possibly have it scheduled.
- Do you have coverage for owned, rented, leased and borrowed equipment? Contractors often use equipment from a variety of sources. Some of it may be equipment you own, but you may rent or lease equipment – or even borrow equipment from another contractor on occasion. Make sure you understand how your insurance provides coverage for (or excludes) equipment in these scenarios.
- Which perils does your policy cover? Construction equipment insurance can provide broad coverage, but that doesn’t mean it covers every potential peril. If your policy excludes losses that you want coverage for, you may want to secure a rider or an additional policy. For example, if your policy excludes mechanical failure, you may need to add equipment breakdown insurance coverage. Your insurance broker can advise you on your exposures and riders or policies that can help ensure you’re protected.
Protecting Your Construction Equipment
Don’t let coverage gaps catch you by surprise or leave you exposed to uncovered losses. Whether you’re a homebuilder, commercial contractor, street and road contractor or other professional in the construction industry, Higginbotham can help you review your current coverage and insurance needs. From construction equipment insurance to general liability coverage, we’re here to help. Talk to one of our construction insurance specialists today.
