Contractors equipment insurance, often called a contractors equipment floater, covers the machinery, equipment, and tools a business uses to do its work, wherever that work happens: on your premises, at a jobsite, in transit, or in storage. It's an inland marine policy, which means it isn't tied to a single listed location the way a commercial property policy is. That mobility is the whole point, because the standard property policy leaves equipment badly exposed the moment it rolls off your lot.
Here's how the coverage works, based on the AAIS Contractors' Equipment Coverage form (IM 7000 04 04).
Contractors Equipment Floater
A contractors equipment floater is an inland marine policy that covers the machinery, equipment, and tools a business uses to do its work wherever that work happens: on its premises, at a jobsite, in transit, or in storage.
What is a contractors equipment floater?
It's an inland marine policy covering equipment "of a mobile nature" used in your contracting, installation, erection, repair, or moving operations. Under IM 7000 04 04 that includes self-propelled vehicles designed and used primarily to carry mounted equipment, and unlicensed highway-type vehicles not operated on public roads, think of a quarry's off-road dump truck.
Despite the name, it isn't just for contractors. Businesses that insure equipment this way include:
- Farms: tractors and tillage equipment
- Golf courses and resorts: greens-keeping equipment and golf carts
- Warehouses: forklifts and scissor lifts
Why doesn't my commercial property policy cover this?
The Building and Personal Property Coverage Form (CP 00 10) is location-based, and it shows:
- It excludes vehicles and self-propelled machines that are licensed for road use or operated principally away from the described premises.
- Property off-premises gets just a $10,000 coverage extension.
- Property in transit gets only $5,000, 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.
Here is how the contractors equipment floater compares with relying on the commercial property policy for your equipment:
Contractors equipment floater
- Covers equipment on and away from 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, frequently changing equipment fleets
Commercial property policy for equipment
- Excludes vehicles and machines licensed for or operated principally 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, poor fit for equipment that moves 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, which is the most the insurer pays for that item. A catastrophe limit caps what's paid in any one occurrence, it may equal the sum of all item values, or be set lower if your equipment is geographically spread out.
For businesses with big fleets or frequent buying and selling, blanket coverage (AAIS form IM 7002) uses a single catastrophe limit plus a per-item maximum, with the insured submitting updated equipment schedules monthly, quarterly, or annually. Report accurately and on time and the full limit is available. Even scheduled policies usually add a blanket limit for miscellaneous small tools via a Small Tools Endorsement.
What equipment is not covered?
The form starts broad, then narrows through Property Not Covered:
| 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 routinely lend and rent machines to each other, and the moment you do, the base form's coverage for that item stops. If sharing equipment is part of how you operate, get the loaned or leased-to-others endorsements before the loss, not after.
Also watch for market-common exclusions that aren't in the AAIS base form: a weight-of-load exclusion (loss caused by exceeding a machine's registered lifting capacity) and crane boom restrictions (some endorsements exclude booms over 25 feet except for specified perils in transit). Crane language varies widely, review it carefully if you own or operate cranes.
What supplemental coverages are built in?
IM 7000 04 04 automatically includes six supplemental coverages, 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 if no limit shown, for up to 60 days |
| Pollutant cleanup and removal | $25,000 annual aggregate |
| Rental reimbursement (rent a substitute while yours is repaired) | $5,000, after a 72-hour waiting period |
| Spare parts and fuel | $5,000 per occurrence |
There's also one coverage extension, debris removal, at 25 percent of the direct-loss payment plus an additional $5,000.
How is equipment valued, and how much coverage do I need?
Unlike buildings, where replacement cost is the norm, contractors equipment is often insured at actual cash value (ACV), replacement cost minus depreciation. Many insurers reserve replacement cost for newer items, commonly defined as five years old or newer. An Agreed Amount endorsement (IM 7026) locks in a value at inception for hard-to-value or modified equipment and switches off coinsurance for those items.
Most contractors equipment policies carry a coinsurance condition at 80, 90, or 100 percent, carry too little and you're penalized at claim time. Real market values, not original purchase price or book value, are what your limits must track.
To set limits that hold up, work through these steps:
Decide how each item will be valued
Replacement cost, ACV, or agreed amount, the choice appears on the schedule of coverages and drives everything else.
Establish real market values
Equipment dealers and used-equipment websites are reliable value sources. Original purchase price, loan balance, and tax-depreciated book value are all common, and all wrong, answers.
Set the catastrophe limit and deductible
Choose flat or percentage deductibles (percentage deductibles here apply to the value of the damaged property, with minimums and maximums), and confirm the deductible applies per occurrence, not per item.
Keep the schedule current
Newly purchased equipment is covered automatically for only 60 days. Report acquisitions promptly, and confirm how your liability policies treat new units too, since "mobile equipment" definitions on the CGL and business auto forms don't always match the inland marine form.
Does it cover lost income when a machine goes down?
Direct damage is the headline, but downtime is the quieter loss. Beyond the built-in rental reimbursement, two endorsements address the time element:
- Continuing Rental Or Lease Payments (IM 7038): pays lease payments you're contractually obligated to keep making on damaged covered equipment, with a 72-hour waiting period.
- Contractors' Equipment Income Coverage (IM 7027): pays lost net income plus continuing operating expenses (including payroll) during the restoration period when damaged equipment interrupts your business. This matters most for losses away from your premises, where the business income coverage on your property policy doesn't reach.
If a general contractor or project owner requires proof of your equipment and liability coverage, that's handled through a certificate of insurance, and often an additional insured endorsement on the liability side.
Frequently asked questions
Does contractors equipment insurance cover theft from a jobsite?
Generally yes, the coverage is open perils, and theft is one of the primary reasons the policy exists, since equipment is routinely left at jobsites overnight and on weekends. Property that's simply missing with no evidence of what happened, however, is excluded.
Are my employees' own tools covered?
Yes, up to $5,000 per occurrence under the built-in Employee Tools supplemental coverage, but only while at your premises or a jobsite. Tools stolen from a truck in a diner parking lot wouldn't qualify.
Is rented equipment covered?
Equipment you rent or lease from others is covered automatically up to $25,000 per occurrence, and a reporting-form endorsement handles frequent or high-value rentals. Note that borrowed equipment needs its own endorsement, and equipment you rent out or loan to others is excluded without one.
What's the difference between a contractors equipment floater and builders risk?
The floater covers the tools and machinery you use to build, while builders risk covers the structure being built and the materials that become part of it. Most contractors need both, coordinated so nothing falls between them.
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.