If you’re a contractor, your equipment isn’t just part of the job — it is the job. From excavators to laser levels, your tools keep projects moving. That’s why contractor equipment insurance matters so much.
Contractor equipment insurance is designed to protect the gear your business depends on. But here’s the catch: it doesn’t cover everything. And too many contractors only find that out after something goes wrong.
In this post, we’ll break down:
What contractor equipment insurance usually covers
What it leaves out
Which add-ons and related policies can help fill the gaps
Why reading the details of your policy matters more than you think
If you rely on your tools to get paid, you need to know exactly how your coverage works. Let’s take a closer look.
Contractor equipment insurance is built to protect your business from one of the biggest threats you face: losing the tools and machines that keep your jobs running. Whether it’s a stolen skid steer or a fire that damages your power tools, this policy helps keep you from taking the full financial hit.
Here’s what contractor equipment insurance usually covers:
This is one of the most common claims. If your gear is stolen from a job site, trailer, or storage area, your policy can help cover the replacement cost — depending on how your coverage is set up.
Dropped, crushed, or backed into — job sites are rough environments. Most contractor equipment insurance policies will cover accidental physical damage caused during normal use.
If your equipment is damaged due to fire, vandalism, or a storm, contractor equipment insurance can cover repair or replacement costs — though some events like floods or earthquakes may require additional coverage.
Most policies cover equipment your company owns, and some will extend protection to rented or borrowed tools as long as they’re listed or disclosed.
This kind of policy is essential because it’s not just about the cost of replacing tools — it’s about keeping your jobs moving and avoiding costly delays. The more equipment you own, the more valuable this protection becomes.
But while it covers a lot, contractor equipment insurance doesn’t cover everything — and that’s where a lot of contractors run into trouble.
Contractor equipment insurance does a lot, but it doesn’t cover everything. This is where things can get tricky. Many contractors assume their gear is fully protected, only to find out later that a claim isn’t eligible — or only partially covered.
Here are some of the most common exclusions and limitations you should know:
If a machine stops working due to age, poor maintenance, or internal failure, that’s considered wear and tear — and contractor equipment insurance won’t cover it. For mechanical breakdowns, you may need a separate policy.
If one of your crew members damages a machine by ignoring safety procedures or misusing the equipment, the insurer might deny the claim. Most policies don’t cover damage caused by poor handling or lack of training.
Leaving a generator in the back of an unlocked truck or tools scattered across an open site? If theft happens, it may not be covered. Insurers often require “reasonable security” measures in order to pay out.
Standard contractor equipment insurance typically excludes major natural disasters. If your region is prone to flooding or earthquakes, you'll likely need to add specific coverage for those risks.
Some policies have a per-item value limit. That means certain hand tools or smaller gear may not be included unless specifically listed or grouped under blanket coverage.
Knowing what contractor equipment insurance doesn’t cover is just as important as knowing what it does. Otherwise, you could end up paying out-of-pocket for losses you thought were insured.
Once you understand what contractor equipment insurance doesn’t cover, the next step is building a more complete protection plan. No single policy covers every risk, which is why many contractors add related coverage or endorsements to fill the gaps.
Here are some key options to consider:
Despite the confusing name, inland marine insurance is one of the most useful add-ons for contractors. It covers tools and equipment as they’re transported between job sites or stored off-site. If something goes missing or gets damaged in transit, contractor equipment insurance alone might not help — but inland marine often will.
If one of your machines fails due to an internal mechanical or electrical issue, standard contractor equipment insurance won’t pay for repairs. That’s where equipment breakdown coverage comes in. It handles internal failures that aren’t caused by outside damage, which can save you thousands in repair or replacement costs.
When essential equipment goes down, your project doesn’t stop — you rent a replacement to keep working. Rental reimbursement coverage can pay for those rental costs while your equipment is being repaired or replaced. Without this, those expenses come straight out of your pocket.
Some policies only protect equipment that’s specifically listed (scheduled), while others allow you to cover a group of items up to a total value (blanket). If your gear changes often or you use a mix of owned and rented tools, make sure your contractor equipment insurance policy uses the structure that fits how you actually work.
These add-ons can be the difference between staying on schedule or dealing with delays, unexpected costs, and out-of-pocket losses. Contractor equipment insurance does a lot — but without the right support policies, you’re still exposed.
Contractor equipment insurance can be a strong safety net — but only if you know exactly how your policy works. Too many contractors assume they’re covered, only to find out too late that the fine print tells a different story.
Here are the key details that can impact your coverage more than you think:
Some contractor equipment insurance policies only pay the actual cash value of damaged or stolen equipment — which means depreciation is factored in. That $15,000 excavator you bought five years ago might only be worth $7,000 today in the eyes of your insurer. If your policy doesn’t pay full replacement cost, you’ll be stuck covering the difference.
Every policy has a deductible, but if it’s too high, it could make filing claims on smaller losses pointless. For example, if your deductible is $5,000 and your loss is $4,500, you're out of luck. Review your deductible to make sure it fits the value of the equipment you’re actually insuring.
Your contractor equipment insurance policy has a total coverage limit — but that number needs to reflect what your equipment is really worth. If your equipment fleet has grown but your policy hasn’t been updated, you may be underinsured without realizing it.
Some policies limit coverage to specific locations or require certain storage or transportation methods. If your gear is stolen from an unsecured trailer, or damaged in a state that’s not listed in your policy, your claim could be denied.
These details might seem small, but they can make a big difference when it matters most. Contractor equipment insurance only works if it fits your business, your tools, and how you operate on real job sites.
Contractor equipment insurance is essential for any business that relies on tools, machines, or heavy gear to get the job done. But it only works when you understand both what it covers and what it doesn’t. From theft and damage to breakdowns and policy gaps, knowing the details of your coverage can save you from major headaches down the line.
If your work involves grading, trenching, or moving serious earth, you’ll want protection that goes deeper. Take a closer look at Excavation Contractor Insurance to see how to build coverage around the real risks of your job.