Check that every tool and machine the business now owns, leases or rents is on a policy that covers it where it actually goes, at a value that would replace it, in the name of the company that owns it. Property that moves (tools, contractor's equipment, mobile machinery, goods in transit and materials at job sites) is usually insured on an inland marine policy. The commercial property policy mainly covers property at the locations it lists. This guide is for new owners of contractors, field service companies and other businesses whose equipment leaves the building.
The short answer
- The seller's equipment schedule is often years out of date: sold items still listed, new purchases missing and values set at the original price.
- Rebuild the schedule from the purchase agreement's asset list and a walk of the yard, then match serial numbers to the policy.
- Scheduled coverage lists each item; blanket coverage uses one limit, often with a per-item cap. Most businesses use a mix.
- Check valuation (actual cash value or replacement cost), any coinsurance clause, and coverage for equipment you rent or lease from others.
- Your lender may require equipment pledged as collateral to be insured for full replacement cost with the lender protected on the policy.
Why isn't your property policy enough for tools that leave the building? (Inland marine)
Despite the name, inland marine insurance has nothing to do with boats for most businesses. It is the family of policies, often called floaters, that cover property that moves or sits away from your listed locations. A commercial property policy usually gives only a small amount of coverage for property off premises or in transit, if any. See inland marine vs commercial property.
| Property | Usual coverage | What to watch |
|---|---|---|
| Hand and power tools | Tools floater or a blanket tools limit | Per-item caps and theft-from-vehicle conditions |
| Excavators, lifts, skid steers, mowers | Contractor's equipment floater | Every unit scheduled at a current value |
| Equipment rented or leased from others | Rented or leased equipment coverage, often by endorsement | Limit high enough for the largest rental |
| Goods and materials in transit | Transit or motor truck cargo coverage | Whether your own trucks and outside carriers are both included |
| Materials and equipment being installed | Installation floater or builders risk | Coverage until the owner accepts the work |
| Laptops, diagnostic and survey equipment off site | Electronic equipment floater | Whether it covers worldwide or only listed sites |
| Customers' property in your care | Bailee coverage | General liability usually excludes property in your care |
Vehicles licensed for road use usually belong on the commercial auto policy. Some self-propelled machines are treated as mobile equipment instead; see mobile equipment vs auto, installation floater and care, custody and control.
Is the seller's equipment schedule still accurate?
In owner-run businesses the equipment schedule is often the page that gets the least attention: machines added by phone years ago, equipment sold without anyone telling the broker, values never revisited. Look for these problems:
- Items sold or scrapped are still listed, so you pay premium for nothing.
- Recent purchases were never added. Many forms give equipment bought after the policy starts automatic coverage only for a limited time and up to a cap, both set by the form.
- Serial numbers are missing or wrong, which slows a theft claim.
- Values reflect the original purchase price, not today's cost to replace.
- Some equipment is titled to the seller personally or still financed in the seller's name, with the seller's lender listed on the policy. See vehicles titled to the seller.
A hypothetical example. A buyer acquires the assets of a commercial landscaping company. To close on time, the buyer's new policy, written in the new company's name, copies the seller's contractor's equipment schedule, last updated four years ago: 12 mowers worth $120,000 in total on an actual cash value basis. The walk-through planned for month three would have found 20 mowers, not 12, plus two skid steers bought last year for about $70,000 each. Eight of the mowers and both skid steers were missing from the schedule. In month two, a trailer with three mowers is stolen from a job site. Two of the stolen mowers were never scheduled. The carrier's position is that units the business owned from the day the policy started are existing equipment that should have been scheduled, not newly acquired, so the newly acquired equipment extension does not help. The claim pays only for the one scheduled mower, at a depreciated value, and the trailer itself is a question for the auto policy. After the loss, the buyer schedules every unit at replacement cost, adds a blanket limit for small tools and updates the lender's loss payable clause. The carrier agrees after review, at a higher premium that the buyer builds into the operating budget.
Fix it in five steps:
- Pull the fixed asset list from the purchase agreement or bill of sale.
- Walk the yard and job sites with whoever runs operations.
- Record make, model, year and serial number for each item.
- Set a replacement value for each item with your operations lead.
- Send the updated schedule to your broker with the correct named insured and loss payees.
To drop items you no longer own, see removing vehicles, drivers and equipment.
Should you list each machine or use one blanket limit? (Scheduled vs blanket)
| Feature | Scheduled | Blanket |
|---|---|---|
| How it works | Each item is listed with its own value | One limit covers a class of property, often with a maximum per item |
| Best for | Large, identifiable machines | Many small tools and items that change often |
| Main risk | An item left off the list may not be covered | The total limit or per-item cap is too low for a big loss |
| Upkeep | Update every time you buy or sell | Recheck the total limit each year |
Most contractors use both: scheduled coverage for the larger machines and a blanket limit for small tools. Ask how the policy treats tools owned by employees. Many forms exclude them unless an endorsement adds them, and technicians who bring their own tools may expect you to replace them after a theft.
How will a loss be valued, and what does your lender require?
Valuation decides the check you get after a loss. Actual cash value is usually replacement cost minus depreciation, though some forms and states use market value; either way it can be far below what a replacement machine costs. Replacement cost pays to replace with new equipment of like kind and quality, usually only once you actually replace it. Many carriers offer replacement cost only on newer equipment, so older units are often insured at actual cash value or an agreed value instead. If your lender requires replacement cost, ask your broker what is available for each unit and share the answer with the lender. Some policies use a stated or agreed value per item. See actual cash value vs replacement cost.
Many contractor's equipment forms carry a coinsurance clause, which reduces a claim payment if the values you reported were too low compared with the true value. If your schedule is understated and the form has coinsurance, even a partial loss can pay short. Check the deductible too, which may be per item or per occurrence.
If you used a Small Business Administration (SBA) 7(a) loan over $50,000, check the lender's insurance terms. SBA's Standard Operating Procedure (SOP) 50 10 8.1 requires personal property pledged as collateral, such as equipment and inventory, to be insured for full replacement cost (or maximum insurable value). The policy also needs a lender's loss payable clause and at least 10 days' notice of cancellation to the lender. That version applies to loans that received an SBA loan number on or after October 1, 2026, and there are limited exceptions for some smaller and Express loans. Earlier loans follow SOP 50 10 8, so ask your lender which version and requirements apply to yours. Your loan agreement may add more. See SBA lender insurance requirements.
Are rented and leased machines covered?
Rental and lease agreements usually make you responsible for damage to or theft of the equipment while you have it, and many require you to name the rental company as loss payee. Coverage for equipment you own usually does not extend to someone else's machine unless the policy says so. Equipment on a long-term lease is usually scheduled like owned equipment, with the leasing company as loss payee, because rented equipment coverage may be limited to short-term rentals. Ask whether the policy covers equipment rented or leased from others, what that limit is per item, and whether it is high enough for the largest machine you rent, such as a lift or an excavator for a big job.
Also ask about rental reimbursement, which helps pay to rent a replacement while a covered machine is repaired or replaced. For a crew that cannot work without its equipment, that expense can matter as much as the machine. Lost income from idle crews is a separate question for your business income review.
Which exclusions catch contractors and service companies?
Equipment forms vary more than most policies, so read the exclusions and conditions with your actual operations in mind. Common trouble spots:
- Theft from vehicles: some forms require the vehicle to be locked with signs of forced entry, or exclude tools left in an unattended vehicle overnight.
- Mysterious disappearance: a tool that simply went missing, without evidence of theft, is often excluded.
- Wear and breakdown: mechanical or electrical breakdown and gradual wear are usually excluded; equipment breakdown coverage is separate.
- Overturn and collapse: some forms limit coverage for cranes and lifts that tip while working.
- Equipment loaned or rented to others: often excluded unless the policy says otherwise.
- Territory: work in other states or countries may fall outside the policy.
For pricing context, see what inland marine insurance costs. Morrow can review your equipment schedule against the assets you bought and request quotes where it makes sense.
Keep reading
- Remove the Vehicles, Drivers and Equipment You No Longer Have
- New Owner Review: Commercial Property
- SBA Lender Insurance Requirements After Closing: A Detailed Checklist
- New Owner Review: Commercial Auto
- Just Bought a Commercial Landscaping Company? Insurance Review Checklist
- All guides for new business owners
Frequently asked questions
Does my commercial property policy cover tools in my work trucks?
Usually only a little, if at all. Property policies focus on your listed locations and often give small or no coverage for property in vehicles or at job sites. Tools that travel are usually insured on an inland marine tools or equipment floater.
Do I need to insure equipment I rent for a job?
Usually yes, because rental agreements typically make you responsible for damage or theft while you have the machine. Ask whether your policy covers equipment rented from others and whether the limit fits the largest rental.
My lender wants equipment insured for replacement cost. What does that mean?
It means the policy should pay what it costs to replace the equipment with new equipment of like kind, not its depreciated value, and the lender should be protected on the policy through a lender's loss payable clause. Send your broker the loan agreement's insurance section.
Are my employees' personal tools covered?
Often not. Many equipment forms exclude property owned by employees unless an endorsement adds it. If technicians bring their own tools, ask your broker how a theft would be handled.
Should I insure a skid steer on the auto policy or the equipment policy?
It depends on whether it is licensed for road use and how the policy defines mobile equipment. Many machines that are not registered for the road are insured on an inland marine equipment floater, while their liability exposure is usually handled under general liability. Confirm with your broker.
References
- U.S. Small Business Administration: SOP 50 10 8.1, Lender and Development Company Loan Programs (effective Oct 1, 2026)
- U.S. Small Business Administration: SOP 50 10, Lender and Development Company Loan Programs (document page)
Just bought a business? Get your insurance reviewed.
Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.
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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.