What Is Tools and Equipment Insurance?

The result? Our client’s tools and equipment insurance covered over $40,000 to replace the stolen items without derailing the project or their cash flow.

This article covers everything a self-employed professional or business owner should know about tools and equipment insurance.

What Is Tools and Equipment Insurance and What Does It Cover?

Tools and equipment insurance – also called a tools floater or contractor’s equipment insurance – reimburses you to repair or replace portable or mobile tools if they are lost, damaged, stolen, or vandalized, whether they’re in transit, in storage, or at a secured job site. 

Quick definition: Any item valued under $2,500 is considered a tool. Anything valued above $2,500 falls under equipment. 

It typically covers items such as:

• Power tools
• Hand tools
• Measurement devices
• Safety gear
• Ladders and scaffolding
• Compressors and generators
• Landscaping equipment
• Cameras and production gear
• Mobile business equipment
• Rented or leased equipment
• Heavy equipment (bulldozers, excavators, backhoes)

What Does Tools and Equipment Insurance NOT Cover?

Tools and equipment insurance typically does not cover: 

• Wear and tear: Gradual deterioration from normal use
• Mechanical or electrical breakdown: Unless equipment breakdown insurance is added as an endorsement
• Tools left in an unlocked vehicle: This is one of the most common claim denials; always lock your vehicle
• Tools left in a dropbox: A heavy-duty large container used to haul debris or construction materials or unsecured container
• Deliberate damage
• Employee theft: Check your policy, as this varies by insurer

Tip: Always check your policy’s exclusions carefully. That’s where most claim disputes happen..

Who Needs Tools and Equipment Insurance in Canada?

Tools and equipment insurance is built for anyone whose livelihood depends on portable or specialized equipment, including: 

• Contractors and skilled trades: electricians, plumbers, HVAC technicians, roofers, painters, welders, carpenters
• Independent and self-employed handypeople
• Landscaping and lawn care companies
• Cleaning and janitorial professionals
• Photographers, videographers, IT technicians, mobile mechanics and detailers

If your tools and equipment leaves your shop or home, you should have this coverage to repair or replace them if they’re stolen, or damaged by fire, water, or vandalism.

According to the Canadian Rental Association, equipment theft costs the construction industry upwards of $1 billion annually in direct losses, lost productivity, and project delays.

Does Your Existing Business Insurance Cover Your Tools and Equipment?

The short answer is ‘no’, and that surprises a lot of contractors.

General liability insurance – the policy most contractors carry – covers third-party bodily injury or property damage caused by your work. It does not cover your own tools and equipment.

Home insurance and personal auto insurance may not cover it either. Most personal policies explicitly exclude tools and equipment used for commercial purposes.Check with your home insurance provider.

This is one of the most common and costly coverage gaps we see. If you’re relying on general liability insurance or a home policy to cover a stolen drill or a damaged generator, you’re not covered.

How Much Does Tools and Equipment Insurance Cost in Canada?

Tools and equipment insurance starts around $125 per year, but could vary based on several factors unique to your business, including:

• The types of tools and equipment and the value of each item
• Your location
• The types of jobs you do and use your tools and equipment for
• Where your tools and equipment are typically stored
• The policy’s coverage limits and deductibles
• Your annual and gross revenue
• Previous insurance claims

The best way to know what the actual cost of this insurance is for your business? Get a free quote and then speak to a licensed insurance broker.

Tools and Equipment Insurance vs Inland Marine Insurance: What’s the Difference?

These terms get used interchangeably. Here’s how they actually differ: 

• Tools and equipment insurance covers mobile tools and equipment if they’re stolen, lost, vandalized, or damaged by fire, water, or a natural disaster. 

• Inland marine insurance is a broader form of coverage that includes everything tools and equipment insurance covers, plus other moveable or specialized property like fine arts, electronics, installation materials, and rented or borrowed items temporarily in someone else’s possession. 

In practice, for most contractors and tradespeople, tools and equipment insurance is what you need. Inland marine coverage makes sense if you’re moving higher-value or more varied property beyond standard trade tools. 

How to Choose the Right Tools and Equipment Insurance Policy

Understanding what type of coverage and coverage limit you need to protect your portable tools and equipment requires a few steps:

• Take inventory of everything you own. Create a list of every piece of portable machinery, tool, and equipment, including purchase dates, serial numbers, photos, and estimated replacement costs. This protects you at claim time. 

• Know the difference between ‘replacement cost’ and ‘actual cash value’. The type of policy you have can be based on ‘replacement cost’ or ‘actual cash value’:
  • Replacement cost-based policies replace or repair stolen or damaged gear with new items of similar kind and quality with no depreciation deducted.
  • Actual cash value pays out based on your gear’s current market value, meaning depreciation is factored in, and your payout will be lower.  

Replacement cost coverage costs more upfront, but it’s almost always worth it.

• Check your vehicle coverage. If you use a vehicle, trailer or equipment that is used on public roads for commercial purposes, it needs to be covered under a commercial auto insurance policy, not a personal one. Most private-passenger or personal auto insurance policies explicitly exclude vehicles and their contents used for business purposes. 
• Work with a licensed insurance broker. A broker who specializes in your trade or industry takes the guesswork out of this process, ensuring you have the right coverage limits and no gaps in protection. 

Frequently Asked Questions About Tools and Equipment Insurance in Canada

What’s the difference between general liability insurance and tools and equipment insurance?

General liability insurance covers third-party bodily injuries or property damage caused by your work or on your premises. Tools and equipment insurance covers your own portable tools and equipment if they’re stolen, vandalized, or damaged. You likely need both. 

Does standard home insurance or personal auto insurance cover work tools?

No, not for business use. Most home insurance and personal auto policies don’t cover work tools or commercial equipment. Check with your home insurance provider to be sure. Assuming you’re covered is one of the most expensive mistakes a contractor can make.

Does tools and equipment insurance cover rented or borrowed equipment?

Yes. Most policies can cover tools and equipment you rent, lease, or borrow for a job, provided they’re listed or the policy includes blanket coverage for non-owned items. Confirm this with your broker, as coverage terms vary by insurer. 

Is tools and equipment insurance tax deductible in Canada?

Generally, yes. Business insurance premiums are typically tax-deductible as a business expense in Canada. Speak to your accountant to confirm based on your specific situation. 

Protect Your Tools. Protect Your Business. Get a Free Quote

Your tools are your livelihood. Losing them, even temporarily, can derail a job, blow a deadline, and hurt your cash flow. 

Tools and equipment insurance is one of the most affordable coverages available for contractors and tradespeople. 

Fill out our online application for a free quote in less than 5 minutes.

Our licensed brokers specialize in business insurance for contractors and tradespeople. We’ll find the right coverage for your work, tools, and budget, and make sure nothing falls through the cracks.