As a developer or construction professional, you’ve probably spent hundreds of thousands or millions of dollars on professional equipment. Even a minor breakdown can quickly turn into thousands of lost dollars and construction projects put on hold indefinitely if you don’t have the right insurance protections.
Equipment coverage can compensate you if you suffer an equipment breakdown. If you don’t already have equipment insurance, our guide to coverage options will help you get the insurance you need.
Best Equipment Insurance
Equipment insurance is a broad type of coverage with protections that vary among providers. Before you sign onto a policy, be sure you understand what each company is offering.
Not sure where to begin? Consider a few of our favorite equipment insurance providers below.
Types of Equipment Insurance
There are multiple types of equipment insurance, and each insurance type provides a unique protection. Equipment insurance policies might vary widely between competing insurance providers as well.
Let’s take a look at some of the most common types of equipment insurance you might need as a contractor or small business owner.
Equipment Breakdown Coverage
Equipment breakdown coverage is the most common type of equipment insurance. Equipment breakdown coverage is included as part of your business owner’s policy’s commercial property insurance in many cases.
However, you might have the option to only purchase this coverage independent of a commercial property insurance policy if you don’t work from a physical location. Some insurance companies refer to equipment breakdown coverage as “boiler and machinery” coverage.
Equipment breakdown coverage compensates you if the machinery you use to work breaks down while in use. Some examples of situations that equipment breakdown coverage can assist you in include:
- Repairing or replacing damaged equipment, including the cost of both time and labor
- Lost wages that come as a result of equipment breakdown
- Lost wages resulting from spoiled inventory
- Other types of expenses that you incur while restoring your equipment
Most equipment breakdown policies include 5 areas of protection:
- Mechanical. This includes motors, generators, water pumps and specialized production and manufacturing equipment.
- Electrical. This includes transformers, electrical cables and electrical systems.
- Computers and computer systems. This protection includes computer systems, hardware, alarm systems and security systems. An important exclusion — equipment breakdown coverage doesn’t include protections against cyber crime and software hacks. In these instances, you should purchase a comprehensive cyber liability insurance policy for protection.
- Air conditioning systems. This also extends to HVAC systems and refrigeration systems as well.
- Boilers and pressure systems.
While most construction professionals know that equipment breakdown coverage is a very important protection, this coverage can also be exceptionally useful for any small business owner who relies on specialized tools to work.
For example, imagine that you own a restaurant, and, a power surge causes your restaurant’s expensive industrial-grade freezer to stop working. The power surge might also shut down any computers that you use to process online orders, making it impossible to contact customers or safely serve food.
In this instance, your equipment breakdown coverage might provide compensation for:
- The cost you spend repairing your freezer and any other cooking equipment damaged by the power surge
- Business income that you lost while your computer and cooking instruments were down
- The costs to cover any spoiled food as a result of the malfunctioning freezer
Commercial Property Insurance
Commercial property insurance is a type of protection that compensates you if your business property is damaged or destroyed in a covered peril. For example, if a jackhammer you use to break up concrete is vandalized or destroyed in a hurricane, your commercial property insurance coverage would help you cover the cost of a repair or a new model.
Your commercial property insurance also extends to any physical building that you operate from as well as your commercial equipment.
What’s the difference between equipment breakdown coverage and commercial property insurance? While commercial property insurance does extend to the equipment you use to work, this type of protection offers coverage for different threats.
Commercial property insurance will only compensate you for damage done to your equipment from outside sources. For example, an oven destroyed in a kitchen fire would be covered under commercial property insurance.
Equipment breakdown coverage protects you from internal threats, including power surges, operator error and mechanical breakdowns. In some cases, your commercial property insurance might include equipment breakdown coverage.
Cyber Liability Insurance
If your business relies heavily on computers and computer data systems, you may want to invest in cyber liability insurance. A cyber liability insurance policy compensates you if your business’s data is hacked, stolen or otherwise compromised by cybercriminals.
Cyber liability insurance may cover the cost of:
- Informing customers that their sensitive data has been stolen
- Pursuing legal action against the party that illegally accessed your data
- Providing customers with identity protection following a hack
- Legal defense costs if a customer sues you following a data breach
While cyber liability insurance isn’t technically a form of equipment coverage because it doesn’t compensate you for damage done to your system’s hardware, it can be an important protection for anyone who stores customer data.
Cyber liability insurance is also an absolute must-have if your company stores especially sensitive customer information — for example, medical records, Social Security numbers or credit card data.
Cost of Equipment Insurance
The price that you’ll pay for your equipment coverage will vary depending on the nature of your business. Some of the factors that may influence what you’ll pay for equipment coverage may include:
- Your business revenue. Your equipment insurance may cover lost wages if a breakdown makes it impossible to conduct normal operations. The higher your business income, the more you’ll pay for your monthly coverage.
- Your equipment costs. The more expensive your equipment is, the more your insurance provider will likely need to pay if you file a claim. If you use new or more expensive equipment, you’ll pay more for your insurance. Additionally, if you use tools that require difficult-to-find parts to repair, you might also pay more for coverage.
- Your claims history. If you’ve made a claim in the past with another insurance company, you’re statistically more likely to file a claim with your new insurance provider. If you’ve filed a claim in the past, you’ll pay more for insurance coverage.
- Your policy limits. Like most types of insurance, equipment coverage comes with a maximum limit that you can claim. For example, if you have a policy limit of $1 million, it means that you can’t claim more than $1 million in benefits from your insurance provider. The higher your policy limits, the more expensive your insurance will be.
The median price a small business owner can expect to pay for equipment insurance is about $14 per month or around $169 per year. However, equipment insurance costs are highly personalized to the individual policyholder and industry. The best way to estimate the price you’ll pay for insurance is to get a quote online from your insurance provider of choice.
How Equipment Insurance Works
When you shop for equipment insurance, you may be able to choose an individual policy for only your tools. However, most small business owners combine their equipment coverage together with their liability insurance and their commercial business insurance through a business owner’s policy (BOP).
A BOP is an umbrella policy that includes coverage for both damages done to your equipment and legal liability protections. For example, if a customer sues you after he suffers an injury on your worksite. If you do choose a BOP, be sure to fully read and understand your coverages, which vary from company to company. Some insurance providers consider equipment breakdown coverage to be an add-on policy.
Even the most comprehensive equipment breakdown coverage won’t compensate you in every situation. Most equipment breakdown policies won’t cover ordinary wear-and-tear. As the policyowner, your insurance company will expect you to cover regular maintenance and care out-of-pocket. If a breakdown is found to be the result of age or neglect, you typically won’t receive any money. Additionally, you’re only covered up to your policy’s limit, which averages around $5,000 per claim.
Compare Your Coverage Options
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