Contractor Equipment Insurance (Inland Marine Insurance)
Contractor equipment insurance covers the tools, machines, and gear your business depends on every day. General liability does not cover your own equipment. Commercial auto does not cover equipment working on a job site. If your tools and equipment were stolen, damaged, or destroyed tomorrow, inland marine insurance, or contractor equipment insurance, is what keeps you working. Here is how the coverage works, what it protects, and how to structure it correctly for your operation.
Why Your Other Policies Do Not Cover Your Equipment
This is the gap that catches contractors off guard more than almost any other coverage issue. A contractor who carries general liability and commercial auto assumes they are covered. Then a tool trailer gets broken into overnight, or a skid steer gets damaged on a job site, and they find out neither policy responds to that loss.
General liability covers damage you cause to other people's property and bodily injury to third parties. It does not cover your own assets. Commercial auto covers vehicles licensed for road use and their contents in some circumstances, but not equipment operating on a job site or stored at a yard. Standard business property insurance covers contents at a fixed address, which does not help when your equipment is spread across three different job sites in two counties.
Contractor equipment insurance, typically structured as an inland marine policy or equipment floater, was built specifically to fill this gap. As IRMI defines it, an equipment floater is property insurance covering equipment that is often moved from place to place. It is a form of inland marine insurance, and it provides coverage regardless of where the equipment is located, whether at a job site, in transit, or in storage.
What Contractor Equipment Insurance Covers
The core of a contractor equipment policy is physical damage coverage for owned tools and equipment against loss from covered perils. As California's Department of Insurance explains in their commercial insurance guide, standard perils in inland marine coverage typically include fire, lightning, windstorm, flood, earthquake, landslide, theft, collision, and overturn of the transporting vehicle. On an all-risk policy, coverage extends to all perils except those specifically excluded, which is a broader and more practical form for most contractor operations.
Owned tools and hand tools from basic hand tools and power tools up through specialty trade equipment are covered under most contractor equipment policies, either as scheduled items or under a blanket tools coverage limit.
Owned equipment and machinery covers larger assets including generators, compressors, air tools, lifts, trailers, and light equipment that does not reach the threshold of a heavy equipment policy. For heavier iron like excavators and dozers, a separate contractor heavy equipment policy is typically the right vehicle.
Leased or rented equipment can often be added to a contractor equipment policy by endorsement. If you regularly rent equipment from a dealer and are responsible for damage under the rental agreement, confirming that your policy covers rented equipment in your care is worth the conversation with your agent. Many contractors sign rental agreements that hold them responsible for damage without realizing their own policy does not cover it by default.
Equipment in transit is covered under most inland marine forms, protecting tools and equipment while being transported between your shop, storage yard, and job sites. This is one of the clearest advantages of inland marine coverage over standard property insurance, which typically covers only property at a fixed insured location.
Off-site and multi-location coverage means the policy follows the equipment wherever it goes. A contractor working on five simultaneous jobs does not need to list each job site address on the policy. The coverage travels with the tools.
What Contractor Equipment Insurance Does Not Cover
Understanding the exclusions is as important as understanding what is covered.
Wear and tear is a standard exclusion across all contractor equipment policies. Equipment that wears out, corrodes, or deteriorates from normal use is not covered. Insurance covers sudden, accidental loss, not gradual deterioration.
Mechanical or electrical breakdown is typically excluded from standard inland marine and equipment floater policies.
A motor that burns out, a hydraulic pump that fails, or an engine that seizes from lack of maintenance is a maintenance issue, not an insurable event under most policies. Equipment breakdown coverage is a separate product that specifically addresses these failures.
Employee theft is often excluded or limited. Tools stolen by an employee typically fall under crime coverage or a fidelity bond rather than the equipment floater. If employee theft is a real concern for your operation, discuss this specific exposure with your agent separately.
Unexplained loss or mysterious disappearance is excluded under some policies. If a tool simply cannot be found and there is no evidence of theft, some policies will not cover the loss. Knowing whether your policy covers mysterious disappearance is worth confirming before you assume a missing item is covered.
How to Structure Your Equipment Coverage
The right structure for contractor equipment insurance depends on the value and type of equipment you own, how spread out your operations are, and what your lenders or contracts require.
Scheduled vs. blanket coverage is the first decision. A scheduled policy lists each piece of covered equipment individually with its own insured value. A blanket policy covers all equipment up to an aggregate limit without itemizing each piece. Scheduled coverage gives you precise limits on high-value items and typically costs less for the same total insured value. Blanket coverage is simpler to manage when you have a large, varied inventory of smaller tools and equipment that changes frequently.
Agreed value vs. actual cash value determines the settlement basis on a total loss. Actual cash value pays the depreciated value of the equipment at the time of loss. Agreed value pays the amount you and the insurer agreed on at policy inception, regardless of depreciation. For equipment that is critical to your operations and expensive to replace, agreed value coverage is worth the higher premium.
Deductible selection affects both your premium and your out-of-pocket exposure on a claim. A higher deductible lowers your premium but increases what you pay when something happens. For small tools, a higher deductible makes sense because the cost of filing a claim for a $200 item is not worth the administrative burden or the potential impact on your loss history. For major equipment, a lower deductible is more appropriate.
Where to Get Contractor Equipment Insurance
NEXT Insurance offers tools and equipment coverage for contractors alongside general liability, workers' comp, and commercial auto. Their platform provides online quotes and same-day coverage for a range of contractor trades and equipment types.
Hiscox provides contractor equipment coverage through an online quote process. Their policies cover tools and equipment for a range of trades and can be combined with GL and professional liability under one carrier relationship.
Thimble offers short-term and project-based equipment coverage for contractors who need to insure tools and equipment for a specific job or contract period rather than a full annual policy. For contractors who work intermittently or take on occasional projects outside their normal scope, Thimble's flexible structure covers the gap a standard annual policy may not be designed for.
Tivly is a commercial insurance marketplace that matches contractors to carriers based on their specific coverage needs. For contractor equipment coverage where standard carriers may not offer the best fit, Tivly connects contractors to a range of commercial insurers including specialty lines carriers that focus on trade and contractor operations.
PRO-TIP: If you store equipment at a location you do not own, such as a supplier's yard, a partner's facility, or a public storage unit, confirm that your inland marine policy covers equipment at third-party storage locations. Some policies restrict coverage to job sites and named locations. A piece of equipment stored somewhere other than an active job site or your own property may not be covered under a policy with location restrictions. Confirm the geographic and location terms of your policy before you leave equipment somewhere other than your own yard.
Keeping Your Equipment Schedule Current
A contractor equipment policy is only as good as the equipment schedule behind it. An outdated schedule with missing items, incorrect values, or equipment you no longer own creates problems in both directions at claim time.
Equipment you purchased after the policy inception date may not be covered if your policy requires scheduled items to be added. Some policies include automatic coverage for newly acquired equipment up to a specified dollar amount for a limited time, typically 30 to 90 days, but that automatic coverage has limits and does not continue indefinitely. Add new equipment to your schedule promptly rather than assuming the automatic provision covers it indefinitely.
Equipment you have sold or disposed of should be removed from the schedule at renewal. Paying premium on equipment you no longer own is wasted money, and in some cases carrying a scheduled item you have transferred to someone else can create complications at claim time.
Review your full equipment schedule at every renewal with actual replacement cost values, not the values you set three years ago. Equipment prices change. A generator that cost $8,000 two years ago may cost $11,000 to replace today. Underinsuring to save premium means you are bearing more of the replacement cost yourself on every total loss.
Watch Out: Rented Equipment Liability Is Often Misunderstood
Here is something that catches contractors regularly. When you rent equipment from a dealer, the rental agreement typically makes you responsible for damage to that equipment while it is in your possession. You sign the agreement, take the equipment, and assume your insurance covers damage to it. Often it does not.
Standard contractor equipment policies cover equipment you own. Rented or leased equipment in your care is covered only if your policy specifically includes it, either through a rented equipment endorsement or a policy that explicitly covers non-owned equipment in your care, custody, and control. Read your rental agreements carefully. If you are signing agreements that make you responsible for damage, confirm with your agent that your policy covers that exposure before you take possession of the equipment, not after something happens to it.
Bottom Line
Contractor equipment insurance fills the gap that general liability and commercial auto leave open. Tools, equipment, and machinery are often a contractor's most valuable working assets and they are exposed to theft, damage, and loss every day they are in the field. Structure your coverage on an all-risk basis, choose between scheduled and blanket coverage based on your equipment profile, confirm how total losses are valued, and keep your equipment schedule current at every renewal. NEXT Insurance, Hiscox, Thimble, and Tivly all offer contractor equipment coverage that can be structured to protect operations from a single tradesperson to a multi-crew contractor with a full equipment fleet.
Related Contractor Insurance Resources
Main Resource: Contractor Insurance Guide — Your complete guide to insurance coverage, requirements, and strategies built specifically for contractors.
Related Articles:
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Heavy Equipment Insurance — Covers insurance specifically for larger iron including excavators, cranes, and dozers, the coverage that works alongside a standard equipment floater for contractors with significant heavy equipment investments.
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Commercial Auto Insurance for Contractors — Covers the vehicles that move your equipment and your crews between jobs, the coverage that works alongside contractor equipment insurance to protect your full mobile operation.
Insurance requirements and market premiums are subject to change alongside state legislation and carrier appetite. While we audit and update this data annually to ensure reliability (Last Updated: May 2026), these figures are for research and planning purposes only. Always verify specific coverage mandates with your local licensing board or a licensed broker.
FAQ: Contractor Equipment Insurance
How do I know whether to schedule my equipment individually or use blanket coverage?
The right answer depends on what your equipment inventory actually looks like. If you own a small number of high-value pieces - a specific skid steer, a generator, a compressor - scheduled coverage makes sense because you can set precise agreed values on each item and typically pay less premium for the same total insured value.
If you own a large, constantly changing inventory of smaller tools across multiple crews, blanket coverage is easier to manage because you are not chasing your agent every time you buy a new drill or swap out a piece of equipment. Many contractors use a hybrid approach: blanket coverage for general tools under a certain dollar value and scheduled coverage for individual items above a threshold, say $2,500 or $5,000. Talk through your actual inventory with your agent rather than defaulting to one structure without comparing how each one prices out for your specific operation.
What should I do immediately after my tools or equipment are stolen?
File a police report first, before you call your insurer. Most contractor equipment policies require a police report as a condition of a theft claim, and filing it promptly establishes the date of loss and the documented inventory of what was taken. Take photos of any evidence at the scene: a broken lock, a forced door, tire tracks, whatever is there. Then contact your insurer or agent and report the claim with the police report number in hand. Compile a list of stolen items with serial numbers, purchase dates, and approximate values. Serial numbers are critical because they appear on your original receipts, and insurers use them to verify ownership and value. Contractors who cannot produce serial numbers for stolen equipment often receive lower settlements than those who can.
Keep a running equipment log, even a simple spreadsheet, updated with serial numbers and purchase prices for everything you own. It takes twenty minutes to set up and saves significant headaches at claim time.
Does contractor equipment insurance cover equipment a client or GC damages on my job site?
This depends on how the damage occurred and whose policy is designed to respond. If a GC's crew or equipment damages your tools while you are working on a shared job site, the GC's general liability policy is the proper policy to respond, since it covers property damage they cause to third parties, and your equipment is third-party property from their insurer's perspective. In practice, getting a GC's insurer to pay promptly is not always straightforward, and you may need your own equipment policy to step in and then subrogate against the GC's carrier to recover. If damage to your equipment is caused by weather, fire, or other covered perils while on a job site, your own inland marine policy is the right coverage to use regardless of who owns the site. The practical takeaway is that your contractor equipment policy is your first line of defense for your own gear regardless of how the loss happened, and sorting out who ultimately pays is often a conversation between carriers after your claim is already in progress.