Tools & Equipment Insurance
Does Tools Insurance Cover Employee Theft?
Does Tools Insurance Cover Employee Theft? — everything contractors need to know to protect their tools and equipment.
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One of the Most Overlooked Exclusions in Tools Policies
Your tools and equipment are your livelihood. A single theft or job site loss can sideline your business for weeks. Tools and equipment insurance — also called inland marine or a contractor’s equipment floater — covers your gear wherever it goes: in your truck, on the job site, or in storage.
The Standard Employee Theft Exclusion
Most tools and equipment policies exclude theft by your own employees. This is one of the most commonly overlooked exclusions. If an employee walks off with tools, a standard tools policy typically won’t pay the claim.
Why It’s Excluded
Insurers separate theft by unknown third parties (an insurable, unpredictable risk) from theft by employees (a controllable, relationship-based risk that should be managed through hiring, supervision, and HR processes). Employee theft is considered a fidelity/crime risk, not a physical damage risk.
Employee Dishonesty Coverage
Employee theft (including theft of tools and equipment) is covered under a crime policy or fidelity bond — specifically ’employee dishonesty’ coverage. This can be added to a commercial package policy. If employee theft is a concern for your operation, ask your agent about crime coverage.
How to Reduce Employee Theft Risk
Tool accountability procedures (signed out/in logs), unique markings on valuable tools, regular inventory audits, and background checks for employees with access to expensive equipment all reduce both the risk and help substantiate a claim if employee theft does occur.
Verify Your Policy’s Specific Language
Some carriers include limited employee theft coverage or offer it as an endorsement on the tools policy. Don’t assume — ask your agent specifically whether employee theft is covered and, if not, what the cost is to add it.