Imagine trying to move snow without a snowplow or spread salt without a salt spreader. That is why you have the proper equipment and why it is essential to insure it correctly. Now, every insurance company has its way of providing coverage for your most necessary items. However, the basics are still the basics. I will touch on two ways we typically see equipment covered and specific coverages you should consider discussing with your agent. Unfortunately, not all companies offer the same coverage, but it is better to know now than after a loss.
We usually see snow and ice removal equipment insured one of two ways. The most popular method is to provide coverage through an Inland Marine policy for contractors’ equipment; however, if the equipment is permanently attached to a vehicle, it can be included within the Business Auto Policy. As with everything, both methods have pros and cons.
In most cases you will have to provide the insurance company a list of your equipment during the initial application or renewal process. This equipment list is most likely insured under an Inland Marine policy, which provides coverage for the equipment regardless of its location while on land, which is why it is called "Inland." You can purchase many types of coverage under an Inland Marine policy, but I will focus on the equipment you can schedule and blanket.
Contractors’ equipment. If you are covering your equipment on an Inland Marine policy, it is most likely listed on your policy as contractors’ equipment with a corresponding schedule of items — detailed information about your equipment (e.g., the year, make, model, serial number and value of the equipment). As a rule of thumb, it’s not covered if it’s not listed. Make sure to review your schedule of equipment at renewal time and add newly purchased equipment as soon as possible.
Blanket limits. In addition to a schedule of equipment, you may have a blanket insurance limit for smaller items, which would read something like "$10,000 limit with a max limit per item of $1,000." As in the example, blanket limits typically have a per-item limit of around $1,000 or less, which means that if a piece of equipment is above $1,000, it needs to be scheduled separately. Some companies will allow you to negotiate a higher per-item limit, especially if you constantly get rid of or acquire new equipment below a specific dollar amount. Understandably, it can be tough to keep track of all your smaller items, so a blanket provides the flexibility needed in these situations.
There are a few additional coverages you should consider discussing with your agent to see if they are available through your insurance company:
Replacement cost coverage. Most policies will pay losses to equipment on an actual cash value basis, which factors in depreciation at the time of loss; however, some companies will allow you to insure your equipment for replacement cost, depending on the age of the equipment. The guideline we typically see is that if the equipment is two years old or less, it is eligible for replacement cost coverage. If the equipment is eligible for replacement cost coverage, it can be relatively inexpensive, so it is worth a phone call to avoid depreciation after a claim.
Loss of use / rental reimbursement coverage. Another coverage item to consider is loss of use coverage and/or rental reimbursement. Loss of use coverage would cover the business for lost revenue due to a damaged piece of equipment, while rental reimbursement would provide funds to rent another piece of equipment in the event yours is damaged.
Not all companies offer these additional coverages, so it is important to make a line-by-line comparison whenever you evaluate competing offers for your insurance program.
As with any other insurance policy, it is critically important to know what is not covered along with what is covered. This is not the same as a policy exclusion because the list of properties that are not covered could be covered under a different circumstance. The most common example is equipment that may be loaned to one of your friends. If you allow your friend to borrow your equipment for any reason, you should verify that they have the proper coverage listed on their policy; otherwise, you could find no coverage at a time of loss.
There are likely a few other instances listed on your policy, so it would be recommended that you consult and review your policy on at least an annual basis to ensure your entire policy fits your current operations.
As mentioned earlier, another way to insure your equipment if it is permanently attached to a vehicle is with a business auto policy. Typically, if the equipment is permanently attached to the vehicle, it can be included in the vehicle’s value for rating purposes. The equipment would then be covered under the comprehensive and collision coverage of the vehicle to which it is attached.
It is essential to remember that if you are not covering the vehicle for comprehensive and collision coverage, then the attached equipment would also not be covered. In this case, you would want to insure the equipment with an Inland Marine policy.
I hope this article piqued your interest in properly insuring your equipment and brought to your attention some additional coverages you may want to consider when reviewing your insurance program with your agent.
This is not an all-inclusive list because each insurance company will offer slightly different coverages, but it should be a good starting point for your business.
Joshua Palmer is an account executive for Mayflower Wollam Group in Canfield, OH. Contact him at 330-538-2273 or joshua.palmer@mayflowerwollam.com.