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Contractor’s Insurance: Covering Your Business Property and Materials

Business Insurance

By Romana King | May 18, 2016

Your tools, materials and equipment are essential to performing your trade. Unfortunately, these essential items can also be targets of theft or be damaged if an unexpected disaster strikes a construction site. Luckily, contractor’s insurance includes coverage for your property. In this article, we’ll explain contractor insurance property coverage and how you can protect your assets.

Typical Contractors Insurance Property Coverage

Commercial property insurance can cover a contractor’s property if it is damaged or destroyed by an insured peril. This includes:

  • Fire
  • Smoke
  • Explosion
  • Lightning
  • Wind
  • Hail
  • Theft
  • Vandalism

For a full list of insured perils, review your policy documents. Endorsements (add-on coverage) may extend protection to other perils.

A bonus is your property is covered whether it’s on your premises or if it’s at a site – an important consideration for contractors. You’ll want to advise your insurer of where you’ll be operating and where equipment will be stored as this can impact coverage and rates.

There are exclusions and these can vary by insurer. The common exclusions are damage caused by wear and tear, rodents or other vermin and intentional actions by yourself or an employee.

Commercial property that can be insured includes nearly anything your business owns, from buildings to equipment to materials.

Equipment Breakdown Coverage

An additional type of insurance available to contractors is equipment breakdown coverage. This covers repairing or replacing essential equipment that is damaged by mechanical or electrical breakdown. This type of damage wouldn’t be covered under commercial property insurance. If you rely on specific tools or equipment, this may be a good option for you.

How Contractors Insurance Property Coverage Works

Commercial property insurance for contracts can be purchased on either a replacement cost basis or an actual cash value basis.

  • Replacement Cost: This is the amount it would take to replace your property or rebuild your premises without deducting any depreciation. You will pay higher premiums but have more complete coverage.
  • Actual Cash Value: The amount it would take to repair or replace the damaged or stolen property after deducting for depreciation. Your premiums will be lower but you may have to cover more out of pocket when it comes to replacing your property.

Whether your business property insurance uses replacement cost or actual cash value, it’s important to review the value of your property on a regular basis. This is necessary because your stock and materials can fluctuate in quantity and value over time. You may also make new purchases. When you add the impact of inflation (the increase in the cost of purchase that occurs over time), it’s clear to see that the cost of replacing or repairing your property will go up over time.

You can determine replacement values by doing your own research and using existing documentation or you can hire a professional appraiser. Their job is to assess the value of your property and give you an accurate estimate of how much it would cost to replace all of your property.

Things to Keep in Mind

It’s important to review your property coverage at least once a year, paying particular attention to replacement values, policy limits and coverages. Don’t forget to inform your broker or insurance company about any changes in your business operations.

Your broker is here to help you protect your business and understand your insurance. Don’t hesitate to reach out with your questions and concerns.

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