Overlooked Coverage that Keeps Projects Moving After an Equipment Loss

Author, Kevin Howard, Partner, Rancho Mesa Insurance Services, Inc.

For trade and general contractors that own heavy and/or valuable specialty equipment, there is an  overlooked coverage that can be critical in certain loss scenarios.

When we think of business income in the classic form, we think of a fire that shuts a business down and a business income policy that responds, supplementing the revenues and/or operating expenses lost over a set time. Separately, there is also a coverage form that is tied directly to an equipment schedule; so, in case of a loss where a revenue-generating piece of equipment is damaged or stolen, there is a business income limit that can offer coverage for potential loss of revenue.

For example, consider a concrete pumping contractor that has roughly $6,000,000 in total scheduled equipment. Three of these items are cranes and/or pumps that are used daily. If the equipment is not running, revenue is lost. If the contractor secures a $150,000 business income policy that aligns with this schedule, there is additional coverage available in case of a loss. The piece of equipment is covered either through actual cash value or replacement cost, and there is now coverage for the loss of income based on historical data vs. the $150,000 limit.

Contractors where coverage makes the most sense for those who own heavier pieces of equipment like concrete pumpers, excavation contractors, grading and or utility contractors, paving contractors, crane operators and equipment rental companies.

The business income limit can be adjusted by an underwriter who typically will have a max limit around $150,000 to $250,000 depending on external factors.

Over the past couple of years, California has experienced a major uptick in equipment theft including gas theft, vandalism and well thought out plots to steal large pieces of equipment. These thefts are more common now because of higher resale values and an abundance of attractive targets. Understandably, it is these types of equipment which are now prime targets for thieves.  And with that, a business income limit becomes an important risk transfer technique.

Inland marine insurance protects the physical assets that contractors depend upon every day while business income coverage protects the financial engine behind those assets. As equipment values continue to rise and replacement timelines become more uncertain, contractors should consider business income coverage as an important option within the policy offerings.

Should you have questions about this exposure within your own operations, please contact me at khoward@ranchomesa.com or (619) 438-6874.