Contractors equipment insurance, often called a contractors equipment floater or simply tool insurance, 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.
And once a machine is gone, it tends to stay gone. Of 11,574 equipment thefts reported in 2016, only 2,442 machines came back, a 21 percent recovery rate, per the National Equipment Register and National Insurance Crime Bureau annual theft report.[1] Insurance, not the police, is how owners get made whole. Everything below follows the AAIS Contractors' Equipment Coverage form (IM 7000 04 04), the most widely used base form for this coverage.
Contractors Equipment Floater
Contractors Equipment Floater is an Inland Marine Policy which provides coverage for the equipment, machinery and/or tools of your trade anywhere you perform your services. This includes coverage while working on site, traveling between job sites, storing the equipment, or when performing maintenance at your offices.
What is contractors equipment insurance?
It's an inland marine policy covering equipment "of a mobile nature" used in your contracting, installation, repair, or moving operations. It's called a floater because the coverage floats with the equipment instead of staying pinned to one address. Despite the name, it isn't just for contractors: farms insure tractors this way, warehouses insure forklifts, and golf courses insure greens-keeping equipment. Watch the use requirement, though. Because the form only covers equipment used in those operations, a golf course's greens mower fits the definition while the cart its security staff drives around the property may not.
Why doesn't my commercial property policy cover this?
The Building & Personal Property Coverage form (CP 00 10) has a geographic limitation as indicated by the following:
- It excludes vehicles and self-propelled machines that are licensed for road use or operated principally away from the described premises.
- Off-site personal property receives 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 away from your premises is covered only for "specified causes of loss", and theft is not on that list.
Measure those sublimits against what actually walks off:
The average stolen machine is worth nearly three times the property form's entire off-premises extension. Theft still has to be proven at claim time, because the floater excludes missing property: equipment that is simply gone, with no physical evidence of what happened, is not a covered theft. The adjuster will want a police report plus something concrete, a cut chain or a pried lockbox. Photograph equipment in place each week and log serial numbers.
How is the coverage structured, scheduled or blanket?
Most policies are written on a scheduled basis: each item has its own limit and catastrophe limit caps what is paid in any one event. The catastrophe limit may be equal to the sum of all items values or lower for better rate when equipment is spread across job sites, and it would not likely hit by an event.
For big fleets or frequent buying and selling, blanket coverage (AAIS form IM 7002) works differently. One catastrophe limit covers the whole fleet, capped by a per-item maximum, and you send the insurer an updated equipment list on a set schedule. On a reporting form your premium and your payout both ride on what you last reported, so a late or understated list caps your recovery at that stale figure. Even scheduled policies usually add a blanket limit for small tools through 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 |
When contractors lend or rent equipment to one another, the floater's coverage for the rented/loaned piece of equipment ends immediately. As this practice may be common within many contractor operations, it would be prudent to obtain both the loaned and/or leased to others endorsement prior to any rental or lease of equipment leaving your operation. Additionally, review a market-common Weight-of-Load Exclusion (IM 7017 06 04), which removes coverage if an object being lifted exceeds the registered lifting capability of the machine. Request the underwriter remove this exclusion.
Does contractors equipment insurance cover cranes?
Yes, cranes are covered as mobile equipment under the base contractors equipment form, and for most owners the floater is their primary crane insurance for physical damage. The catch is the boom. Boom collapse is the loss insurers worry about most, since it often totals the entire crane. Many carriers respond with a boom restriction: the AAIS Boom Restriction Endorsement (IM 7016 04 04) removes coverage for crane booms over 25 feet unless the loss comes from a specified peril while the equipment is in transit. Crane language varies more from carrier to carrier than almost any other part of this coverage, so if you own or operate cranes, read the boom wording before you bind, not at claim time.
How much coverage do I need, and what's built in?
Set your limits at real market values, not purchase price or depreciated book value. Unlike buildings, contractors equipment is often insured at actual cash value rather than replacement cost, and many insurers reserve replacement cost for items five years old or newer. Most policies carry a coinsurance condition at 80, 90, or 100 percent, so carry too little and you're penalized at claim time. An Agreed Amount endorsement (IM 7026) locks in a value at inception for hard-to-value equipment and switches off coinsurance for those items.
IM 7000 04 04 also folds in six supplemental coverages automatically, 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, for up to 60 days |
| Pollutant cleanup and removal | $25,000 annual aggregate |
| Rental reimbursement (a substitute while yours is repaired) | $5,000, after a 72-hour waiting period |
| Spare parts and fuel | $5,000 per occurrence |
Newly purchased equipment rides on that 60-day window, so report acquisitions promptly and confirm how your general liability and business auto forms treat new units. Their "mobile equipment" definitions don't always match the inland marine form.
Frequently asked questions
Does contractors equipment insurance cover theft from a jobsite?
Generally, they do. Theft is included in this type of open-peril coverage because equipment may be left at job sites during the evenings and on weekends. Coverage does not apply if property has been removed, but there are no signs (physical evidence) of how it was taken. Such instances would be considered a “mysterious disappearance” instead of an act of theft.
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?
Rental/leased equipment will be automatically included in your policy up to $25,000 per occurrence. A reporting form endorsement can also provide additional coverage for higher value rentals. If you borrow equipment from another person, you will need a separate endorsement. Additionally, any equipment you lend out or rent to other individuals is not covered unless an additional endorsement is purchased.
What's the difference between a contractors equipment floater and builders risk?
The floater covers your tools and equipment used in building while builders risk covers the structure being built as well as materials that become a part of it. Most contractors need both. Builders risk picking up lumber, pipe and fixtures once they are at the site, while your tools stay on the floater from day one through to the end of the job.
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.
The Bottom Line
- contractors equipment insurance provides a type of inland marine floater that goes with your tools and machinery wherever they go, on site, while being transported, and when they are stored. This will provide the theft protection your commercial property insurance does not. The contractor can write this as either scheduled (each piece) or as blanket (all pieces), insuring each machine at real market value rather than book value. If you have any cranes, please read the boom endorsement prior to binding. Ask your Broker for a copy of the coverage schedule and review it against the actual items in your yard.
References
- 1.National Equipment Register and National Insurance Crime Bureau. “2016 Equipment Theft Report.” Accessed July 2026. https://www.ner.net/annual-theft-report/ ↩