7 Things you need to know about insuring contractor’s equipment
Here’s a little insurance trivia….
The 19th century French term en bloc, meaning “all together or all at the same time”, was used to describe insurance policies covering multiple perils or coverages, usually for a dealer. Think Jewelers Block or Furriers Block – the first “all risk” policies dating from the 1900s. Before then, businesses purchased policies for different perils. Block inclusive contracts also extended coverage to furniture, fixtures and tenant’s improvements and betterments, largely eliminating the need for separate inland marine or property forms.
Convenient and cost effective, it was a novel concept at the time. Today, Block policies apply to businesses beyond jewelers, but with the same intent: target an industry and offer multiple coverages under one policy form.
But, be careful. Not all policies are en bloc. What should you look for when insuring your contractor’s equipment? Here are seven helpful tips!
1. One Coverage Form, Not Many
Check if there is an additional coverage for computer equipment, media, data, valuable papers and records, tenant’s improvements and betterments, office furniture and supplies, and other business personal property. If not, you will need separate property or inland marine coverage forms. This can be expensive for the insurance carrier to issue, make for a long policy contract, and potentially involve multiple deductibles for the same loss. Also ensure that coverage applies if the above property is owned by you as well as leased or rented by you from others.
2. Words Matter
You’re running a contracting business and have several different jobs going on at once. Suddenly, equipment being used on one job is needed for another project. The foreman is on a tight schedule, so he rents the needed equipment, which you are required to insure for $250,000. You are not concerned when he signs the rental agreement, but…
Wouldn’t you know it – the equipment is stolen that night. Gone for good. The rental agreement requires insurance for Replacement Cost valuation, but your insurance policy only provides Actual Cash Value. It does not reflect your Legal Liability, up to Replacement Cost, should you rent equipment from others. The equipment is only worth $200,000 ACV, however, so you must pay $50,000 out of your own pocket to the rental company.
Know the coverage your policy provides, and where the gaps are. Look at the Property Not Covered section to determine what types of property are not covered by your policy. Read the Exclusions section, because even when property is covered, not all causes of loss are insured. Then read the Valuation provision to see what amount your property is insured for. Lastly, learn about Additional Coverages or Coverage Extensions to understand how your indemnity might be enhanced.
3. Show Me You Care
You care about your property – so much, in fact, that you paid to equip it with a Global Positioning System or register it with the National Equipment Register. Unfortunately, your equipment still was stolen. Does your insurance carrier recognize that you went above and beyond?
With a Deductible Waiver, an insurance company can waive the deductible you would have to pay due to theft or conversion if your property is equipped with an operational Global Positioning System tracking device or similar electronic tracking device or chip. Alternatively, the insurance carrier may waive the deductible if you register the property on the National Equipment Register database prior to the date and time of loss.
A deductible can be a sizable expense for you – often starting at $1,000 – so this makes a big difference.
" With a Deductible Waiver, an insurance company can waive the deductible you would have to pay due to theft or conversion if your property is equipped with an operational Global Positioning System tracking device or similar electronic tracking device or chip. "
4. Doing the Right Thing
What if the police show up and tell you the equipment you just paid for was stolen property? Not your fault, of course, but you have to return it to the rightful owner. You try to collect from whom you purchased said equipment, but he can’t pay behind bars.
Check if your policy includes an additional coverage called Reimbursement for Returning Stolen Property. In the event that you have been induced by any fraudulent scheme, trick, device, or false pretense to purchase stolen property, you may be reimbursed for the amount you paid and cannot recover upon returning the property to its rightful owner.
5. Deadheading and Insurance
After you’ve delivered your equipment for the day, hauling equipment of others on the way back from a job is a good way to earn some extra cash.
The other option is deadheading (making the return trip with an empty trailer), which earns you… well, nothing.
An additional coverage called Transporting Property of Others pays those sums that you become legally obligated to pay for loss to covered property of others while in your care, custody, or control, if caused by a covered loss. But not all contractor’s equipment policies provide this coverage. You might need to buy a separate motor truck cargo legal liability form instead, which can be a time-consuming process. If your insurance carrier has “got their en bloc on” though, you may be covered.
6. Keeping Business Relationships Safe and Sound
You care about your business relationships, and so should your insurance carrier.
It’s routine for contractors to help each other out from time to time. If you have equipment that you are not using, you can loan, lease or rent it to other contractors and vice versa. Be sure your policy has automatic coverage not only for Loaned, Leased and Rented Equipment to others, but also for Borrowed, Loaned or Rented Equipment from others.
Also – and this is very important – check if a limit for the above applies automatically in the additional coverages or if you have to remember to schedule it specifically.
7. Take Care of Your Employees
You work hard, and so do your employees. If your contractor’s equipment suffers a covered loss, it impacts your bottom line. But what if the same thing happens to your employees’ tools and work clothing?
It matters to them... shouldn’t it matter to you, too?
Check your contractor’s equipment policy for Employees Tools and Work coverage. Most don’t provide this because they rely on your employees to buy their own coverage. But sometimes they might not have done so. Their tools may be specialized – not something you have on hand – and need to be replaced fast so that they can get back to work.
Also verify if the policy deductible applies to the coverage, because it might be higher than the equipment or work clothing loss itself. Ideally there should be no deductible.
We get it
Business is complex; insurance does not have to be. AXA XL’s Contractor’s Equipment Coverage Solutions includes 26 additional coverages designed to cover a wide variety of construction operations, all delivered by a team that adds insight and creativity to solid analytics and experience. The result? Intelligent solutions that meet individual needs.
About the Authors
Alexander McGinley is the Head of Underwriting Operations, Product and Strategy for AXA XL’s North America Marine team. Mike Perrotti is the Inland Marine Practice Leader for AXA XL’s North America Marine team.