For tradespeople in the construction industry and other professions where tools are vital, understanding insurance costs is a key consideration. When evaluating tools insurance, it's essential not only to consider the premium itself but also to weigh up the potential costs of not being insured.
This guide breaks down the costs associated with tools insurance and clarifies what you can expect in terms of coverage limits and claim payouts.
Tools insurance, at its core, is designed to protect your business from the financial impact of tool loss, damage, or theft. The breadth of this coverage influences the overall cost and value of the insurance.
Generally, tools insurance covers your essential handheld tools – both powered and non-powered – and typically protects them in scenarios where they are lost, stolen or damaged.
Coverage usually applies whether your tools are secured in a locked vehicle, building or worksite.
Understanding the scope of coverage helps you assess if the potential benefits outweigh the insurance premium.
Tools insurance is a relevant consideration for anyone who relies on their tools to perform their work and generate income. This is especially pertinent to professionals in the construction industry and related trades.
The need for tools insurance and the evaluation of its cost is universal across different business structures. It doesn't matter if your business is structured as a sole tradership, a limited company, or a partnership.
If your work depends on your tools, considering the cost of tools insurance against the risk of tool loss is a vital business decision. Policies can also be extended to cover tools used by your employees, apprentices, and trainees.
Adding coverage for employees' tools will factor into the overall premium cost.
While tools insurance represents an expense, consider the potential financial and professional repercussions of not having it.
Unfortunately, theft and damage to tools are frequent occurrences in the construction industry and similar trades, regardless of how careful you are. The importance of tools insurance, and thus its justification of cost, comes down to the peace of mind and practical protection it offers:
- Peace of mind: Knowing you have insurance provides significant peace of mind, allowing you to work without constant worry about tool loss crippling your business.
- Quick tool replacement: Insurance provides a mechanism to replace tools quickly after a covered event, minimising disruption to your work.
- Preventing breach of contract: If tool loss prevents you from completing a job, insurance can help you recover and avoid potentially costly breaches of contract and damage to your professional reputation.
- Protecting income: If you cannot work without your tools, you cannot earn income. Tools insurance helps you get back to work and earning sooner, offsetting the cost of the premium against potential income losses.
Therefore, when evaluating the "cost" of tools insurance, remember to weigh it against the potentially much higher "cost" of being uninsured and suffering a significant tool loss event.
The amount of tools insurance cover you need directly determines the premium cost. To estimate your required cover:
- Create a detailed tool list: Itemise all the tools you wish to insure.
- Gather receipts (if possible): If you have receipts from tool purchases, these are helpful for valuation and in case of a claim.
- Calculate total tool value: Determine the current replacement value of all your listed tools. This total value is the amount of insurance cover you should consider.
Tools insurance policies offer varying limits of liability to suit different needs and budgets. Common cover limits available typically range from £1,000 up to £15,000.
To illustrate, below are some of the allowances and limitations applied to our policies:
No single article limit
Within the overall policy limit you choose (e.g., £15,000), there is generally no single item limit. This means you are not restricted to a maximum payout per individual tool, as long as the total claim value stays within your overall sum insured.
Maximum payable is sum insured
The maximum total amount the insurance policy will pay out in any claim, or across all claims within a policy period, is the total sum insured you selected (e.g., £15,000). Choose a sum insured that genuinely reflects the total replacement value of your tools.
Basis of payout for items beyond repair (replacement)
If a tool is stolen or damaged beyond repair and needs to be replaced, the insurance payout will be based on:
“The value to replace the item with a new item of equivalent type and specification, but in a condition equal to, but not better than, its condition when new.”
This means depreciation might be factored in, reflecting the pre-loss condition of the tool.
Basis of payout for repairable items
If a tool is damaged but can be repaired, the insurance policy will typically pay:
“The reasonable costs to return the item to the working condition it was in immediately before it was damaged.”
This covers the cost of repairs necessary to restore the tool to its pre-damage functionality.
The precise cost of your tools insurance premium is determined primarily by:
- The total value of the tools you wish to cover: Higher value tools will generally result in a higher premium.
- The level of cover you select: More comprehensive policies with broader coverage (e.g., 24/7 cover, European cover) may have slightly higher premiums than more basic policies.
However, it's important to be aware that tools insurance can be affordable. For many tradespeople, the annual premium cost is often less than they initially expect, especially when weighed against the potential financial losses of tool replacement without insurance.
Ways to potentially manage tools insurance costs
- Package deals: Explore obtaining tools insurance as part of a broader business insurance package. Insurers often offer discounted rates when you bundle multiple insurance types (e.g., tools insurance with public liability and van insurance).
- Online quotes: The quickest way to get an estimate of cost tailored to your specific needs is to apply for a reliable quote online from a reputable insurance provider specialising in tradesperson insurance. Online quote tools allow you to get an indicative premium in just a few minutes, helping you quickly assess the affordability of cover.