How to Enhance Your Contractor’s Equipment Policy

September 14, 2015

If you’re a contractor, your equipment represents a crucial asset and investment for your business that needs to be protected. How can you better protect that investment with a contractor’s equipment insurance policy that covers some of the largest assets and investments that you have?

Let’s take a look at a common scenario; ABC Paving won a $20,000,000 job to pave a strip of highway on the New Jersey Turnpike. Part of its estimate in preparation for the winning bid took into account the fact that ABC Paving owns an asphalt plant 10 miles away from the job site. The cost of manufacturing and hauling its own asphalt such a short distance was a key factor in ABC Paving winning the job. What if a few days into the project, a fire at the asphalt plant shuts down that operation for eight months? It is preferred that asphalt plants be covered on a Contractor’s Equipment Insurance Policy instead of a Property Policy because a standard Contractor’s Equipment Policy provides broader protection than a standard Property Policy. However, a few key coverage grants should be negotiated into the Contractor’s Equipment Policy to provide protection in this scenario:

Contractor’s Equipment Business Income Coverage

A Contractor’s Equipment Insurance Policy should be enhanced to provide coverage for loss of business income for damage to contractor’s equipment such as an asphalt plant. If a contractor’s owned asphalt plant is shut down and there are other clients beyond that of the contracting business, then the contractor will need this coverage to reimburse lost business.

Extra Expense Coverage Omission

The Contractor’s Equipment Insurance Policy should be enhanced to provide Extra Expense Coverage for the contracting business as a result of having to purchase asphalt from another provider that may be a further distance to the job site. Any additional costs to keep the project on schedule would be covered as it relates to the asphalt plant fire.
When you purchase insurance, you purchase the promise to pay a claim via a contract called the policy. That’s why when reviewing the terms, conditions and exclusions within your Contractor’s Equipment Policy, look for some of the key enhancements discussed above and make sure they are negotiated during the underwriting process. If not, an uncovered loss can cause large out of pocket payments and turn a successful, timely and profitable job into a painful loss.