Contractors equipment insurance, also called a contractors equipment floater or tool insurance, covers the machinery, equipment and tools a business uses for its work wherever they are: on your premises, at a jobsite, in transit or in storage. It is an inland marine policy, so it is not tied to one listed address the way a commercial property policy is. That matters because a standard property policy leaves equipment badly exposed as soon as it leaves your yard.
Stolen equipment is rarely recovered. Of 11,574 equipment thefts reported in 2016, only 2,442 machines were recovered, a 21 percent recovery rate, according to the National Equipment Register and National Insurance Crime Bureau annual theft report.[1] For most owners, insurance is the only way to replace a stolen machine. This guide follows the AAIS Contractors' Equipment Coverage form (IM 7000 04 04), the most widely used base form for this coverage.
Contractors Equipment Floater
A contractors equipment floater is an inland marine policy that covers the equipment, machinery and tools of your trade anywhere you work: on site, between job sites, in storage, or during maintenance at your own premises.
What is contractors equipment insurance?
Contractors equipment insurance is an inland marine policy for equipment "of a mobile nature" used in your contracting, installation, repair or moving operations. It is called a floater because the coverage follows the equipment instead of staying tied to one address. Despite the name, it is not only for contractors: farms insure tractors this way, warehouses insure forklifts, and golf courses insure greens equipment. Watch the use requirement, though. The form covers only equipment used in those operations, so a golf course's greens mower fits the definition, while the cart its security staff drive around the property may not.
Why doesn't my commercial property policy cover this?
Your commercial property policy is built around a location, so it covers equipment away from that location only in small amounts. The Building and Personal Property Coverage Form (CP 00 10) limits it this way:
- It excludes vehicles and self-propelled machines that are licensed for road use or operated mainly away from the described premises.
- Property away from your premises gets a $10,000 coverage extension.
- Property in transit gets only $5,000, for limited perils, and only in or on your own vehicle.
- Under the Causes of Loss Special Form, builders' machinery, tools and equipment away from your premises are covered only for "specified causes of loss", and theft is not on that list.
Compare those sublimits with what actually gets stolen:
The average stolen machine is worth nearly three times the property form's entire off-premises extension.
Theft still has to be proven at claim time. The floater excludes missing property: equipment that is simply gone, with no physical evidence of what happened, is not a covered theft. The adjuster will want a police report plus something concrete, such as a cut chain or a pried-open lockbox. Photograph your equipment in place each week and keep a log of serial numbers.
Contractors equipment floater
- Covers equipment on and off your premises, including jobsites and transit
- Open perils basis, typically including theft, flood and earth movement
- Built-in supplemental coverages: employee tools, rented equipment, rental reimbursement
- Blanket options handle large fleets that change often
Commercial property policy for equipment
- Excludes vehicles and machines licensed for road use or operated mainly off premises
- Only $10,000 off premises and $5,000 in transit
- No theft coverage for builders' equipment away from the premises
- One described location, a poor fit for equipment that moves from job to job
How is the coverage structured, scheduled or blanket?
Most policies are written on a scheduled basis: each item is listed with its own limit, and a catastrophe limit caps what is paid for any one event. The catastrophe limit can equal the total value of all items, or be set lower for a better rate when the equipment is spread across job sites and one event is unlikely to reach all of it.
For large fleets or frequent buying and selling, blanket coverage (AAIS form IM 7002) works differently. One catastrophe limit covers the whole fleet, capped by a per-item maximum, and you send the insurer an updated equipment list on a set schedule. On a reporting form, both your premium and your claim payment depend on what you last reported, so a late or understated list caps your recovery at that old figure. Even scheduled policies usually add a blanket limit for small tools through a Small Tools Endorsement.
What equipment is not covered?
The form starts broad and then narrows through its Property Not Covered section:
| Not covered | Why, and what to do about it |
|---|---|
| Aircraft or watercraft | Separate policies, though drones and barges can sometimes be added by endorsement |
| Property you lease or rent to others | Restore with the Equipment Leased Or Rented To Others endorsement (IM 7013) |
| Property you loan to others | Restore with scheduled or jobsite loaned-property endorsements (IM 7022 / IM 7023) |
| Equipment underground in mining operations | Some forms exclude all below-ground equipment, but excavator buckets used for trenching stay covered |
| Highway vehicles hauling people or cargo | That's a business auto exposure, but unlicensed off-road units stay covered |
| Waterborne property | Add back with a Waterborne Endorsement (IM 7019) if you barge equipment to jobsites |
Contractors often lend or rent machines to each other, and the moment you do, the base form stops covering that item. If sharing equipment is part of how you work, put the leased or rented to others and loaned property endorsements in place before anything leaves your yard. Also look for the weight-of-load exclusion common in this market (IM 7017 06 04), which removes coverage for a loss caused by a load heavier than the machine's rated lifting capacity. Treat it as negotiable and ask the underwriter to remove it.
Does contractors equipment insurance cover cranes?
Yes. Cranes are covered as mobile equipment under the base contractors equipment form, and for most owners the floater is their main crane insurance for physical damage. The catch is the boom. Boom collapse is the loss insurers worry about most, because it often totals the whole crane. Many carriers respond with a boom restriction: the AAIS Boom Restriction Endorsement (IM 7016 04 04) removes coverage for crane booms over 25 feet long unless the loss comes from a specified peril while the equipment is in transit. Crane wording varies between carriers more than almost any other part of this coverage, so if you own or operate cranes, read the boom wording before you bind, not at claim time.
How much coverage do I need, and what's built in?
Set your limits at real market values, not the purchase price or depreciated book value. Unlike buildings, contractors equipment is often insured at actual cash value rather than replacement cost, and many insurers offer replacement cost only for items five years old or newer. Most policies have a coinsurance condition of 80, 90 or 100 percent, so if you insure too little, the claim payment is reduced. An Agreed Amount endorsement (IM 7026) fixes a value at the start of the policy for hard-to-value equipment and turns off coinsurance for those items.
IM 7000 04 04 also includes six supplemental coverages automatically, each adjustable on the schedule:
| Supplemental coverage | Automatic limit |
|---|---|
| Employee tools (at your premises or a jobsite) | $5,000 per occurrence |
| Equipment leased or rented from others (unscheduled) | $25,000 per occurrence |
| Newly purchased equipment | 30 percent of the catastrophe limit, for up to 60 days |
| Pollutant cleanup and removal | $25,000 annual aggregate |
| Rental reimbursement (a substitute while yours is repaired) | $5,000, after a 72-hour waiting period |
| Spare parts and fuel | $5,000 per occurrence |
To set limits that hold up at claim time, work through these steps:
Decide how each item will be valued
Replacement cost, actual cash value or agreed amount: the choice appears on the coverage schedule and drives everything else.
Establish real market values
Equipment dealers and used-equipment sites are reliable sources of value. The original purchase price, the loan balance and depreciated book value are common answers, and all of them are wrong.
Set the catastrophe limit and deductible
Choose a flat or percentage deductible, and confirm that the deductible applies per event, not per item.
Keep the schedule current
Newly purchased equipment is covered automatically for only 60 days. Report new purchases promptly, and confirm how your general liability and business auto forms treat new units, because their "mobile equipment" definitions don't always match the inland marine form.
Frequently asked questions
Does contractors equipment insurance cover theft from a jobsite?
Generally, yes. Theft is covered under this open perils coverage, which matters because equipment is often left at job sites overnight and on weekends. Coverage does not apply when property is gone with no physical evidence of how it was taken. That is treated as "mysterious disappearance", not theft.
Are my employees' own tools covered?
Yes, up to $5,000 per occurrence under the built-in Employee Tools supplemental coverage, but only while they are at your premises or a jobsite. Tools stolen from a truck in a diner parking lot would not qualify.
Is rented equipment covered?
Equipment you lease or rent from others is covered automatically up to $25,000 per occurrence, and a reporting form endorsement can add coverage for higher-value rentals. Equipment you borrow needs a separate endorsement. Equipment you lend or rent to others is not covered unless you add an endorsement for it.
What's the difference between a contractors equipment floater and builders risk?
The floater covers the tools and equipment you build with, while builders risk covers the structure being built and the materials that become part of it. Most contractors need both. Builders risk picks up lumber, pipe and fixtures once they reach the site, while your tools stay on the floater from the first day of the job to the last.
This guide is for educational purposes and summarizes standard ISO and AAIS policy language. Your policy's specific terms, conditions, and endorsements control. Talk to a licensed broker about your actual exposures.
Checking your equipment schedule
Contractors equipment insurance is an inland marine floater that follows your tools and machinery on site, in transit and in storage, and it covers the theft your commercial property policy does not. It can be written scheduled (item by item) or blanket (one limit for the fleet), and each machine should be insured at real market value, not book value. If you own cranes, read the boom endorsement before you bind. Ask your broker for the coverage schedule and check it against the equipment actually in your yard.
References
- 1.National Equipment Register and National Insurance Crime Bureau. “2016 Equipment Theft Report.” https://www.ner.net/annual-theft-report/ ↩