Navigating Equipment Insurance: Does Your Contractor's Policy Cover Rentals?

Posted on: 4 September 2015

Contractors often rent specialized pieces of construction equipment or tools that they don't need often enough to own. But it can be confusing -- even for contractors who rent on a regular basis -- to understand what kind of insurance coverage they may need.

Typically, homeowners who rent equipment are required to pay an additional fee on top of the rental cost for insurance. This covers any damage to the machine or tool, so that the rental company doesn't have to wait for homeowner's insurance to kick in. Many rental companies will assign the same fee to a professional contractor. But is such a policy necessary for a contractor? 

Contractors' Equipment Insurance Policies

Contractors carry insurance on both their workers and their owned equipment. This covers the cost of medical treatment for any accidents as well as reimbursement for damages or loss of equipment. Usually, contractors pay a higher rate for equipment insurance because they may take it to several types of locations in the course of working for multiple clients.

Many contractor-specific policies will also cover equipment that is not owned by the contractor, such as if they use a machine or tool owned by a sub-contractor or that is rented.

Rental Company Requirements

There are times when a contractor's insurance policy may not be sufficient for the rental company. That's because a rental company's income depends on being able to turn around equipment quickly and have it available for rental without much downtime. If a piece of equipment is damaged, the contractor's policy will typically cover replacement or repair, but it might not pay for the time that the rental company is without that item in their inventory.

In addition, some contractor policies cover equipment only for its "actual cash value," which means that either the contractor or the rental company must pony up for the difference between the item's value and its replacement cost. It can take time to get this all straightened out between the rental company, the contractor and the contractor's insurance company.

For these reasons, even though a contractor carries insurance that will cover some of the replacement costs of damaged rental equipment, a rental company is often going to require the cost of additional insurance per rental item.

Making Sure Equipment Is Safe

Both contractors and rental companies have an incentive to keep equipment working properly and reduce risk in the field. Implementing the following safety procedures can minimize the use of insurance and keep costs lower for everyone:

  • Inspect equipment before use. Both the rental company and the contractor should check the equipment for any operating issues before using it.
  • Make sure warning labels and manuals are available. If labels are not legible or placed properly on the equipment, it should not be used until it's possible to replace them.
  • Train any users before letting them operate the equipment. Both rental companies and contractors should take steps to ensure that at least a brief rundown of how to use the machine or tool is carried out with the end user. 

While additional insurance can be a financial and administrative burden, the rental company may require it regardless of any policy you carry as a contractor. Plan ahead for that requirement and commit to operating any rental equipment as safely and efficiently as possible to keep overall costs down for everyone.

For more information, talk to a professional like Rentals And More Inc.