What is inland marine insurance?

A plumber’s pipe threader spends its mornings in a van, its afternoons in a client’s basement and its nights in a storage unit, and inland marine insuranceInland marine insuranceInland marine insurance covers business property that moves or is kept away from your main location, like tools on job sites, goods in transit and property held for others.Read the definition is the kind of property insurance built for exactly that life. It covers business property that moves, or that sits somewhere a standard property policy doesn’t reach, because a commercial property policy is written around your business address while inland marine coverage follows the property wherever the job takes it.

It has nothing to do with boats. For most small businesses, the inland marine coverage that matters is tools and equipment insurance, which covers tools and gear on job sites, in transit and in storage, and the rest of this page explains how it fits next to the property policy you may already have.

Why a policy for your drills has a nautical name

The name comes from marine insurance, the coverage for ships and their cargo, applied to property that moves over land. New York’s Department of Financial Services still defines inland marine as insurance for property in transit over land, for property that is mobile by nature and has no fixed location, and, more surprisingly, for property that serves as an instrument of transportation or communication, such as bridges, tunnels, piers and television antennas.

So the policy that covers your nail gun belongs to the same family as the policy on a toll bridge, and what ties them together is that none of these things sits neatly inside a building at one address.

States still sort the category using a Nation-Wide Marine Definition from the National Association of Insurance Commissioners, revised in December 1976 according to Indiana’s Department of Insurance and adopted by New York with exceptions, but you don’t need any of that to buy coverage. Your agent may call the policy a “floater,” an old term for coverage that floats with property instead of staying at one address.

What it covers today

Every row has the same shape: valuable equipment that spends its working life away from the address on your property policy. The California Department of Insurance describes inland marine as a specialized type of property insurance that primarily covers damage to or destruction of business property while in transport, and Maine’s Bureau of Insurance is more specific about small businesses, saying that equipment that isn’t attached to the building or is used off the premises, like a contractor’s mobile equipment, is covered with a contractor’s equipment floater.

One thing that rides in the truck usually isn’t a tool. Pipe, fixtures or a water heater on their way to be installed are materials, and coverage for them is generally an installation floater or builder’s risk question, which tools coverage may exclude and Corgi doesn’t sell.

Whether each row in the table is covered depends on the policy you buy and its terms. Corgi’s tools and equipment policy is built for tools and equipment that travel, including rented and borrowed equipment when the policy includes it, while other inland marine coverages, like those for valuable papers or accounts receivable, are separate products that Corgi doesn’t offer.

Your property policy stops at the property line

This is where tools go uninsured. Owners who already have a commercial property policy often assume their tools are covered “by the business insurance,” but a property policy is generally written for a location, and the equipment, furniture and stock it covers are the things at your business address, with a small extension for property away from it, if there’s any extension at all.

That arrangement works beautifully for a retail shop’s shelving and a café’s ovens, which never leave. It works badly for a plumber, an electrician or a mobile groomer, whose most valuable equipment is almost never at the shop, and who may not even have a shop.

But the mistake runs the other way too. Corgi’s tools and equipment page notes that equipment and stock at your business location are covered by property insurance, so buying tools coverage doesn’t replace a property policy for the shop, and a contractor with a real workshop full of stationary machinery may need both.

How do you tell which you need? Look at where your equipment spends the night. If most of it sleeps at your address, a property policy does most of the work, though you should still check what it pays for the laptop you take to clients. If most of it sleeps in a truck, a trailer or a storage unit, a property policy alone is the wrong tool, and an off-premises extension of a few thousand dollars is no substitute for coverage written for property that moves. A mobile groomer, a mobile mechanic and a caterer with a van all land on that side, and so does any contractor whose “shop” is really a garage at home, where a homeowners policy usually pays little for business property.

Scheduled, blanket or both

Inland marine policies usually let you insure items in one of two ways, and for most businesses the right answer is to use both.

Schedule the handful of pieces that would hurt to lose, and put everything else under a blanket limit. Then read the per-item cap, because it’s the line that catches people: a blanket limit of $25,000 doesn’t help much if the policy pays no more than a few thousand dollars for any one tool and your most expensive one costs far more, and the only fix for that is to move the expensive tool onto the schedule. The figures here are illustrative.

So what doesn’t it cover?

Inland marine is broad, but it isn’t a maintenance plan or a theft guarantee. Common exclusions and conditions include:

• Wear and tear and mechanical breakdown. A compressor that fails from age isn’t a covered loss.
• Unexplained disappearance. Tools that go missing with no sign of theft are often excluded; the policy may call it “mysterious disappearance.”
• The vehicle itself. Tools coverage applies to the tools, while your truck or van needs commercial auto insurance.
• Injuries from using tools. An employee hurt by a saw is a workers’ comp claim.

Read the theft conditions word by word, since a truck break-in is exactly the loss this coverage is bought for. Some policies pay for theft from a vehicle only if it was locked and shows visible signs of forced entry, and some restrict theft from an unattended vehicle overnight or ask that tools be kept in a locked box fixed to the truck. If you park on the street or leave tools in the truck at night, ask about those conditions by name, because a policy whose conditions don’t match the way you actually work will fail you on the one night it matters.

What business insurance doesn’t cover explains these and other common exclusions across policies.

Setting it up in an afternoon

1. List what travels. Go through every truck, kit and storage unit, and note what each item would cost to replace today.
2. Decide what to schedule. Put high-value items on a schedule and the rest under a blanket limit, if your policy offers one.
3. Pick a valuation. Ask whether tools are valued at replacement cost or actual cash value, which matters a lot for older tools.
4. Count rented and borrowed equipment. If you rent a lift or an excavator for a job, ask whether your policy covers it and up to what limit.
5. Choose a deductible. Many policies apply the deductibleDeductibleA deductible is the amount you pay toward a covered loss before your insurance pays, usually subtracted from the claim payment.Read the definition per occurrence, so ask how it works when several tools go in one theft. A higher one lowers what you pay for coverage and raises what you pay on every claim.

What insurance contractors need to win jobs covers what clients and general contractors ask for, but a certificate request rarely asks about your tools, so the decision is usually yours.