Tools and Equipment Insurance: What It Is and How It Works (2025)

Key Takeaways

Tools and equipment insurance pays for the cost of replacing work tools stolen or damaged anywhere you take them.

It covers theft and accidents but won't pay for wear and tear or employee theft.

Construction, plumbing, HVAC and photography businesses benefit most from tools and equipment insurance coverage.

What is Tools and Equipment Insurance?

Your work tools are expensive, and losing them to theft or damage can shut down your business overnight. Tools and equipment insurance covers the cost of replacing or repairing your equipment when accidents happen.

Unlike general liability (which pays others when you cause damage), this equipment insurance pays you directly when your tools get stolen from job sites, damaged in accidents or lost to covered events like fires.

You can add business equipment insurance to your business owner's policy (BOP) for the most affordable option, or buy standalone coverage if you have expensive equipment that needs higher limits.

What Does Tools and Equipment Insurance Cover?

Equipment insurance coverage varies by policy, but most tools and equipment insurance plans protect against common risks that can shut down your business. Knowing what's covered helps you choose the right protection level and avoid surprises when you need to file a claim.

This table shows how tools and equipment insurance responds to different situations:


Someone steals tools from a job site.	✅	A contractor's power tools are taken from a construction site overnight. Your policy covers theft, whether it happens at your shop or on location.
Tools wear out from everyday use.	❌	A mechanic's wrench set shows normal wear after two years of regular use. Your policy won't cover this because tools naturally wear out from daily use.
A vehicle accident damages your equipment.	✅	A plumber's pipe inspection camera is destroyed when their work van crashes. Accidents that happen while you're working are covered.
An employee steals equipment.	❌	A landscaping crew member uses a leaf blower for personal use. Most policies don't cover employee theft. Instead, you'd need crime insurance.
Fire damages workshop tools.	✅	A garage fire ruins a carpenter's table saw and router. Fire damage is covered no matter where your tools are stored.
Equipment is stolen from a hotel room.	✅	A wedding photographer's camera lenses are taken during an overnight business trip. Your coverage follows your equipment anywhere you take it for work.
Flooding damages basement workshop equipment.	❌	An electrician's tools are ruined by flooding without separate flood coverage. You need separate flood insurance since regular policies exclude water damage.
An accidental spill damages a laptop.	✅	An IT consultant's computer is ruined when coffee spills on it during a client meeting. Tool insurance covers sudden accidents like spills and drops.

DON'T STOP HERE: OTHER BUSINESS INSURANCE YOU NEED

Tools and equipment insurance protects your gear, but running a business safely requires more coverage:

How Much Tools and Equipment Insurance Do I Need?

Tools and equipment insurance isn't legally required, but many contracts require it before you can start work.

General contractors often require subcontractors to carry business equipment insurance. Commercial clients may require proof of coverage before allowing you on-site. Government contracts and large construction projects frequently mandate specific insurance coverage, and tool insurance is typically part of these requirements.

Equipment insurance cost varies based on your industry risk, equipment value, coverage limits and location. Consider these factors when choosing your coverage amount:

1
Calculate replacement costs.
Add up the cost to replace all your essential tools and equipment today, not what you originally paid for them. For example, a $300 drill you bought three years ago might cost $450 to replace now due to inflation and newer models.
2
Consider downtime costs.
How long would you be out of business if your tools were stolen? A photographer who loses camera gear might miss weeks of bookings while waiting for replacements. Higher coverage limits help you replace equipment faster and get back to work.
3
Account for all locations.
Don't forget tools stored in multiple places. That includes items in your shop, work vehicles, job sites, storage units and even equipment you take home. An electrician might have tools worth $15,000 spread across their truck, workshop and three active job sites.
4
Review your cash flow.
Tool insurance costs should fit your monthly budget. The best business equipment insurance policy is one you can keep active long-term. Choose coverage limits that work for your finances rather than stretching for maximum protection you can't sustain if cash gets tight.

Who Needs Tools and Equipment Insurance?

Businesses transporting valuable tools between locations or storing equipment at job sites benefit most from tools and equipment insurance. This coverage makes sense when replacing your tools would cost more than you can afford to lose.

Construction businesses.

Between job sites, storage units and work trucks, a general contractor's $30,000 worth of tools are spread everywhere. Contractor equipment insurance protects power tools and specialized equipment when you move them daily between locations.

Landscaping companies.

Commercial mowers, trimmers and blowers work at different client properties each day. When equipment disappears (and it happens often), you're looking at thousands in replacement costs while your business sits idle.

Photography businesses.

Your cameras and lighting travel constantly to wedding venues, corporate events and photo shoots. A single theft could mean thousands of dollars in gear gone, which is why small business equipment insurance matters for creative professionals.

Plumbing businesses.

Expensive diagnostic tools and pipe equipment are stored in service vehicles that thieves love to target. Contractor equipment insurance covers inspection cameras and leak detection devices that cost a fortune to replace.

Auto repair shops.

Diagnostic scanners and specialty tools are expensive and challenging to lock down. Insurance for tools and equipment steps in when equipment gets stolen or damaged.

HVAC businesses.

You're moving equipment, such as gauges, refrigerant machines and installation tools, between customer locations all day. Job site theft and transport damage are real risks that tools and equipment insurance coverage addresses.

Electrical businesses.

Testing equipment and wire tools are essential for every service call. Commercial equipment insurance covers your tools, whether they disappear from a worksite or get damaged in a vehicle accident.

Tools and Equipment Insurance Coverage: Bottom Line

Tools and equipment insurance covers replacement costs when your work tools get stolen or damaged on the job. While it protects against theft and accidents, it won't cover wear and tear or employee theft. Construction, plumbing, HVAC and photography businesses rely on this coverage to protect tools they transport every day.

Insurance for Tools and Equipment: FAQ

We addressed the most frequently asked questions about tools and equipment insurance coverage:

Does tool insurance cover equipment used by employees?

Yes, your policy covers the equipment employees use during work. If someone steals tools from your crew's truck, you're covered. But employee theft isn't covered. If an employee takes tools for personal use, you'd need separate crime insurance for that situation.

How do I file a tools and equipment insurance claim?

Contact your insurer within 24 to 48 hours and provide a detailed inventory with serial numbers and replacement costs. Photograph the damage and file a police report for theft. Your adjuster investigates and determines coverage, with processing times varying by claim complexity.

Are tools covered if they're stolen from my vehicle?

Yes, theft from work vehicles is covered anywhere: job sites, home, or on the road. Work trucks are common targets since they hold tools worth thousands of dollars. Take basic precautions like locking up and hiding expensive equipment from view.

What's the difference between equipment insurance and general liability?

General liability pays others when you cause damage, like your ladder hitting a client's car. Equipment insurance pays you when your tools get stolen or damaged. You typically need both since you often require general liability coverage to get a contract.

What's the maximum coverage limit for individual tools?

Coverage limits vary significantly by insurer and policy type, with basic business policies often having lower per-item limits. For expensive equipment above standard limits, you'll need scheduled coverage. Match your limits to your actual tool values for proper protection.

Can I add tools and equipment coverage to my existing business insurance?

Yes, most insurers let you add this as an endorsement to your current business policy. This is usually the most affordable option, keeping everything with one carrier. Coverage costs vary based on your equipment value and business type.

Does this insurance cover rented or borrowed equipment?

Coverage varies, but many policies include limited protection for rented equipment as a percentage of your total coverage. That often has restrictions, though. The rental company's insurance or having separate coverage might work better for valuable rentals.

About Mark Fitzpatrick

Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.

Read Full Bio »

Tools and Equipment Insurance