Contractor Tools, Equipment, and Trailers: What Your GL Policy Doesn't Cover

Contractor tools and equipment theft is one of the most common and most underinsured losses in the trades. A single break-in can wipe out $30,000 to $80,000 in tools, and most contractors discover their coverage gap only after it happens. Their GL policy doesn't cover it. Their commercial auto policy covers the truck — not the contents. And their homeowner's policy specifically excludes business-use property.

This guide covers what inland marine and equipment coverage does, what it costs, and how to structure your program so a theft or loss doesn't shut down your operation.

What General Liability Doesn't Cover

General liability insurance covers bodily injury and property damage you cause to other people and their property. It does not cover your own property.

The coverage that protects your tools and equipment is called inland marine — a term that has nothing to do with water and everything to do with property that moves. Inland marine covers property in transit, on a job site, in a vehicle, or in storage. It follows your equipment wherever it goes.

The gap between GL and inland marine creates real exposure for contractors who assume one covers the other. If you've been operating without inland marine because you thought your GL "covered you," this is worth reading carefully.

Commercial Auto: What It Covers and What It Doesn't

Your commercial auto policy covers the physical vehicle — the truck, van, or trailer chassis. It does not cover the tools and equipment inside or on the vehicle.

This distinction matters most in two scenarios:

Tools stolen from a locked vehicle

This is the most common contractor theft scenario in Texas. Someone breaks a truck window overnight and takes $15,000 in power tools, hand tools, and equipment. The commercial auto policy pays for the broken window. It does not pay for the stolen contents. Without inland marine, you're replacing that inventory out of pocket.

Permanently mounted equipment

Some equipment — welding machines, compressors, hydraulic lifts, crane attachments — is permanently bolted to a truck. Whether this is covered under commercial auto physical damage or requires a separate inland marine policy varies by carrier and policy language. Some carriers include permanently mounted equipment in the auto physical damage. Others treat it as separate property that requires its own coverage. Read your policy carefully and ask your broker explicitly. A $75,000 service rig is not something to leave to ambiguity.

Inland Marine Insurance: How It Works

Inland marine policies for contractors come in two main forms: blanket and scheduled.

Blanket coverage

A blanket inland marine policy covers all of your tools and equipment up to a specified total limit — say, $50,000. You don't have to list every item individually. The carrier insures your entire inventory up to the blanket limit.

The advantage is simplicity. You don't need to update a schedule every time you buy a new tool. The disadvantage is that coverage limits may be inadequate if your inventory grows, and claims may involve more documentation to establish what was lost. Some carriers also apply per-item sublimits under a blanket policy — $5,000 or $10,000 per item maximum — which creates problems for expensive individual pieces of equipment.

Scheduled coverage

A scheduled inland marine policy lists each piece of equipment individually with its own coverage amount. The insured values are agreed upon upfront, so there's no dispute at claim time about what the item was worth.

Scheduled coverage is better for high-value items: laser levels, specialized tools, equipment with replacement costs above $5,000. For a large equipment fleet — excavators, skid steers, lifts — scheduled coverage with agreed values is the right structure.

Which to use

Most contractors benefit from a hybrid: a blanket policy for hand tools and small power tools (anything under $2,000–$3,000), and scheduled coverage for expensive items that would be painful to replace at the wrong depreciated value. Talk to your broker about what your carrier's blanket sublimits are before assuming a single blanket policy is enough.

Trailer Coverage: The #1 Underinsured Asset in Contracting

Trailers are the most underinsured asset in the Texas contracting world. The problem is structural: trailers occupy an insurance gap that neither commercial auto nor inland marine covers cleanly by default.

When a trailer is attached to and being pulled by your truck, it typically falls under commercial auto physical damage — but only if the auto policy includes trailer coverage. When it's parked and detached, it's no longer a vehicle — it's a piece of equipment, which means inland marine. Some carriers cover trailers under auto physical damage regardless of attachment status. Others exclude detached trailers entirely.

What this means in practice: if you have a utility trailer, enclosed cargo trailer, or equipment trailer, verify explicitly with your broker:

• Whether it's covered under your commercial auto physical damage while being towed
• Whether it's covered when parked and detached
• Whether the contents inside the trailer are covered
• What the insured value is and whether it reflects current replacement cost

A 16-foot enclosed trailer holding $20,000 in tools is a $35,000+ loss if both the trailer and its contents are stripped. That's a recoverable loss with proper coverage and an out-of-pocket catastrophe without it.

Heavy Equipment Coverage

If you operate heavy equipment — excavators, skid steers, bulldozers, backhoes, boom lifts, scissor lifts — the inland marine category expands into what's often called contractor's equipment or mobile equipment coverage.

This coverage handles:

• Physical damage: Fire, theft, vandalism, and accidental damage to owned equipment.
• Equipment breakdown: Some policies include coverage for mechanical or electrical failure. This is often a separate endorsement and worth adding for equipment where a breakdown strands a job.
• Rented or leased equipment: If you rent equipment from United Rentals or other rental yards, the rental agreement holds you responsible for damage or loss. A rented equipment extension on your inland marine policy covers your liability for damage to equipment you've rented. Without it, a broken rental becomes an out-of-pocket expense equal to the repair or replacement cost.

Heavy equipment is typically scheduled by serial number with agreed values, especially for machines worth $50,000 or more. Replacement cost vs. actual cash value matters significantly here — a five-year-old excavator with $200,000 replacement cost may have a book value of $100,000. If the policy is written on actual cash value and the machine is totaled, you receive the depreciated value, not what it costs to replace it. For critical equipment, replacement cost coverage is worth the premium difference.

What Rented Equipment From Others Requires

When you rent equipment from a rental yard, the rental contract typically requires you to either purchase the rental house's damage waiver or provide a certificate of insurance showing coverage. Many contractors sign rental agreements without reading them carefully and assume the rental house's damage waiver covers everything.

Damage waivers from rental companies have exclusions — typically for gross negligence, theft without police report, tire damage, and damage from overloading. They also often require you to return the equipment on a flatbed in case of breakdown, at your cost.

If you rent equipment frequently, a rented/leased equipment endorsement on your inland marine policy is usually more comprehensive and less expensive than paying per-rental damage waivers. For a detailed look at what rental houses actually require on your certificate, see our guide on contractor's equipment and inland marine insurance.

What Inland Marine Insurance Costs

Inland marine rates vary by total insured value, equipment type, theft history in your area, and deductibles. General ranges for Texas contractors:

These are rough ranges — actual premiums vary by carrier, deductible, equipment type, and your claims history. Deductibles typically run $250 to $1,000 for hand tools and $1,000 to $5,000 for heavy equipment.

Reducing Your Premium Without Reducing Coverage

Higher deductibles on low-value items

For hand tools and small equipment that you could realistically replace out of pocket, a higher deductible reduces premium without materially increasing your risk. A $500 deductible on a blanket policy covering $30,000 in tools costs more per year than a $1,500 deductible — and most individual tool claims are small enough that filing them anyway raises your premium at renewal.

Security measures

Carriers often provide premium credits for documented security practices: locked storage boxes secured to truck beds, locking hitch pins on trailers, GPS tracking on high-value equipment, and job site security lighting. Document these measures and tell your broker at renewal.

Don't over-schedule items that depreciate quickly

Agree on realistic values for scheduled equipment. Insuring a three-year-old compressor at its original purchase price costs you premium for coverage that exceeds the actual replacement cost of comparable used equipment. Work with your broker to value items honestly.

COI Requirements for Equipment on Job Sites

General contractors increasingly require subs to carry inland marine or equipment coverage as a condition of site access — particularly on larger commercial and government projects. The GC's project insurance program may cover the structure under builder's risk, but it almost never covers the tools and equipment individual subs bring to the site.

If you need to show evidence of equipment coverage on a certificate of insurance, your inland marine policy can be listed in the "Description of Operations" field on the ACORD 25. Most inland marine policies don't generate a separate ACORD certificate the way GL and auto do, but your broker can document it on the GL certificate. Ask specifically before the job starts — not the morning of mobilization.