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Updated
Tools and equipment insurance is a form of property insurance that offers financial protection for portable tools and equipment used by trade workers on the job.
This insurance can cover the cost of repairing or replacing tools and equipment if they are lost, vandalized or stolen, or damaged because of fire or floods.
Generally, items valued under $1,500 are classified as tools while items valued above that amount are considered equipment. This isn’t a universal standard, so check with your insurance provider about their classification system for tools and equipment.
Regardless of whether tools and equipment are owned, leased or rented, insurance will reimburse the costs to repair or replace them. It also doesn’t matter if the tools are in storage, in transit or left at a client’s location when damaged.
Here are some examples of what insurance for tools covers:
Tools insurance is not mandatory at a federal or provincial level, but it’s highly recommended for contractors and other related professionals who regularly use expensive tools and equipment within their business.
Some clients may also require contractors to have insurance for tools so that they won’t be responsible for damages or missing equipment. This also helps guarantee that damaged tools won’t lead to project delays.
If you take your business seriously, you’ll want tools and equipment insurance to guarantee projects run smoothly.
Typically, tools insurance is used by construction companies and contractors that lug equipment around to multiple job sites.
These include the following:
Tools and equipment insurance won’t provide coverage to damages caused by general wear and tear, or those that are used longer than their typical lifespan.
Deliberate damage to tools and equipment won’t be insured either.
Insurance quotes vary in price, but typically start at few hundred dollars per year. Premium costs will depend on the following factors.
Business size: A larger business typically has more workers and will need a sizable number of tools and equipment to match.
Industry: Some industries, like construction, are more prone to accidents than others. Increased risk means a higher insurance premium.
Value: The total value of tools and equipment insurance will influence premiums. Expensive or large collections of tools will lead to higher premiums.
Type: If certain types of tools and equipment are more prone to theft, likely because it’s highly specialized or valuable, then your premiums will cost more.
Location: Where you store tools will also affect risk. Areas with higher crime rates, extreme weather or higher instances of natural disasters could cause higher premiums.
Past insurance claims: A history of claims may lead to higher insurance rates. Insurance companies will see you as a bigger risk.
Several factors influence the rates for tools and equipment insurance. These factors help insurance companies assess the risk associated with insuring your tools and equipment and determine the cost of your premiums.
Here are some of the main considerations:
Here are just some ways you can lower your tools insurance rate. Always ask your insurance provider if they have suggestions on how to reduce premiums.
Getting the cheapest tools and equipment insurance takes some strategy.
Consider these three tips:
When you do get a quote from an insurance company, always ask if there is a way to reduce the rate if price is an issue.
Here are three ways tools insurance can come in handy.
1) Stolen equipment covered by insurance
Sarah is a landscaper working on the greenery of a new country club that’s about to open shortly. The club’s owner said she could keep her equipment in a locked storage area overnight for convenience. She returns to work the next day and discovers some of her equipment has been stolen. Luckily, thanks to tools and equipment insurance, she’s able to cover the cost to replace the stolen equipment. Without it, her business would have taken on the cost.
2) Tools replaced after fire, thanks to insurance
Sam’s small construction company is building a new house. One day, the workers come back from a lunch break to find the house is on fire, along with their tools and equipment. Thanks to tools and equipment insurance, Sam can cover the cost of their replacements. Without insurance, the project could have faced serious delays as Sam would have needed to purchase new tools and equipment out of pocket.
3) Vandalized tools replaced by insurance
Jeff, an electrician, agrees to make sure all the electrical is up to date at a nearby high school. Since the project is taking a week, he keeps his tools and equipment in storage at the school. One day, the school gets vandalized, including the items he kept in storage. Since he has tools and equipment insurance, he’s able to get the cost of them replaced easily. If he hadn’t bought insurance, he would have had to dig into his savings to buy new tools and equipment.
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Answers to common questions about protecting your tools and equipment
Even if your tools and equipment are covered under manufacturer warranty, it’s still a good idea to get insurance, least of all for peace of mind. Other considerations include:
The amount of coverage you need will depend entirely on the value of the tools you're insuring and the nature of the work you do. So, if you own a large construction company with many workers using highly specialized, expensive tools, then you’ll likely want higher coverage than a self-employed plumber responsible for one person’s equipment.
While an insurance company can help you estimate the amount of coverage you need, you can also make your own rough calculations by following these steps:
Most importantly, work with a commercial insurance broker to get quotes from multiple companies. An experienced broker will be able to advise you about which of the available policy limits meet your business needs.
Commercial property insurance and tools and equipment insurance are two different types of coverage.
Commercial property insurance protects businesses from financial losses related to property and physical assets stored within an owned or rented building where the business operates out of. For example, insurance would cover damage to contents, furnishings, stock, as well as tools and equipment that are stored within the building.
Tools and equipment insurance, on the other hand, offers protection for equipment contractors use and store on a job site (away from their business location). It also covers tools if they are damaged in transit.
Commercial property insurance may not offer enough coverage to recoup all the losses to equipment and tools. Tools and equipment insurance offers targeted coverage.
Alexandra Bosanac has been a content manager for RATESDOTCA since 2021, specializing in auto insurance. She began covering auto insurance in 2017. Alexandra has a bachelor's degree in journalism from Toronto Metropolitan University. Before joining the RATESDOTCA editorial team, she reported for the Canadian Business, the Toronto Star, the National Post, and the CBC.
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