The Unique Risks of Owning and Insuring Construction Equipment
Construction companies face unique risks and likely require tailored insurance policies for their construction equipment because of their specialized nature, and the fact that these assets typically involve larger capital investments.
One pressing issue is the need for policies that cover not just the equipment itself but also the unique risks associated with different types of jobs and environments. Another significant challenge is the risk of theft or vandalism, as construction sites are often temporary and can be vulnerable to criminal activity.
Many businesses may insure general equipment, but construction equipment often operates under more variable conditions, making risk assessment complex. As a result, construction companies must navigate a more nuanced landscape of insurance needs, balancing adequate coverage against cost, while securing policies that address the dynamic nature of their work environment.
What types of construction equipment insurance policies are available?
Insurance for Contractors Equipment is typically placed on an Inland Marine policy and provides coverage for the direct physical damage. There are many types of Contractors Equipment that coverage can apply to – Owned items, Leased/Rented/Borrowed from Others, Loaned to Others, Rental Expense.
Owned items may be on a Scheduled basis (actually endorsed onto the policy) or with a list on file with the insurance carrier and adjusted on an annual reporting basis.
When determining the proper limit for each piece of equipment, you need to make sure you have the appropriate value. Some carriers can offer a Blanket limit of coverage, which means one limit would apply to all equipment and act as a buffer should the value be inadequate at the time of a loss.
Another important component of coverage is the Valuation. Replacement Cost is preferred as it does not take into depreciation as does Actual Cash Value. When Replacement Cost applies, you will be reimbursed for the cost to repair or replace with like kind and quality. The damaged equipment would be repaired or replaced with equipment of comparable age, condition, and quality. If Actual Cash Value applies, the reimbursement is minus depreciation.
If you lease/rent items on a short-term basis, be sure your policy includes adequate coverage for the value of these items. The policy would have a limit specifically for Leased/Rented Items and it may contain both Maximum per Item as well as an Aggregate limits (all items at any given time). We strongly recommended you request your Insurance Broker provide the leasing/rental company with a Certificate of Insurance evidencing the appropriate coverage for each item Leased/Rented to monitor the items and their value.
If you loan items to others, policies can provide coverage; however, typically a written agreement needs to be in place with the borrowing party taking responsibility for any damage to these items. They in turn need to have adequate coverage on their Inland Marine policy for Borrowed items. If you have this exposure, please reach out to your Insurance Professional to discuss further.
Rental Expense coverage could be important to have in the event a piece of Owned or Leased/Rented equipment is damaged, and you incur additional expense to replace that item in order to continue working without interruption. Also, the agreement with the rental company may require a continuation of payment until the piece is repaired.
Insurance for Contractors Equipment can be written in a variety of different ways. It is important to review your existing coverage and any specific needs you may have – please do not hesitate to reach out to us.