Had some tools stolen?

The Construction Risks Material Damage and Liability insurance arranged by BRIC for their clients automatically includes $10,000 insurance protection for Construction Plant, Machinery, Equipment and Tools whilst in or around a construction site. This cover is provided at no cost.


Whilst few builders take up these added extras, additional cover can be provided, including the option to extend cover to Australia Wide.


Having offered this cover now for several years we have also had some ‘unhappy experiences’ when the insurer has received a request from the builder to pay the cost of replacing the stolen items. Because of this we have decided to highlight some things that you can do to avoid having similar experiences.


First – make sure your tools etc are secure;

It is a common misunderstanding that many builders believe their tools and equipment will be safe if locked in a shed or trailer located onsite. Our recommendation is that if possible take these home with you every night. That is most often the safest place for them.


We acknowledge this is not always practical as the time spent loading/ unloading and transporting the tools/equipment can take up a good portion of the working day.


If you have to store them onsite overnight then do so in a highly secure container. Shipping containers are commonly used for this purpose and provide a good deal of security from a break-in point of view. However, any security measure is only as good as its weakest link and even with a steel shipping container the padlock used to lock the door may be easy to break or pick.


We recommend you purchase a “burglary proof” padlock. They cost a little more but can save you loads of time and effort involved in replacing stolen goods.


Do not be fooled into thinking that a locked trailer is a safe option. Many thieves simply take the trailer and all! Likewise a site shed sometimes can be broken into through its walls. There are very few things that will deter a determined burglar. Having secured your property as best as you can the next thing is to take steps now to avoid a problem with insurance later.


What many builders assume is that their insurance will cover the cost of replacing their tools with new ones; unfortunately this is not the case. We are not aware of any policy in Australia that provides “new for old” replacement cover for tools.


Typically a policy will include the following wording:-


“Where we choose to make a cash settlement to You for loss or damage to Construction Plant; Hand Tools or Employees Effects the amount so paid shall take into consideration the depreciation of such property.”

 

An alternative wording is a little less obvious:-


“in the case of a total loss, if the cost of repairs equals or exceeds the Market Value of the insured item immediately before the occurrence of loss or damage, settlement shall be made on the basis of total loss.

We will at Our option either:

(i) supply an equivalent replacement item similar in type, capacity and condition to the insured item immediately prior to the occurrence of the loss or damage.
(ii) pay the Market Value of the insured item immediately prior to the occurrence of the loss or damage."

 

This policy defines Market Value as the value of the item immediately before its loss.


This policy says they will either give you another secondhand bench saw (for example) to replace yours – where the replacement saw is of the same age and type as yours – or if one is not available then pay you a cash settlement of its Market Value (at their determination).


As you can appreciate the “Market Value” of a secondhand bench saw will be a lot less than its new replacement cost.


So the first thing you need to appreciate is that insurance is not the answer to protecting your tools – security is! You will never get from an insurer the full replacement cost of your equipment unless you can prove to them that each item had been purchased that day!


The next hurdle you will face with an insurer is demonstrating your loss.


When an Insurer takes your money for the policy they never ask you to produce a list of your tools, photos, serial numbers, poof of receipts etc. However once you have them stolen the insurer then demands that you produce for them evidence that you owned each item, what its make and model was, when you purchased it etc. etc. etc.


Insurers do have a reasonable right to have you prove your loss. It becomes a matter for debate as to what extent of proof is required.


To avoid this problem we recommend that you:-

 

a)    Document NOW each item of plant, equipment and tools that you currently have – this can be as easy as taking a digital photo and giving the photo a name describing its make, model, age and estimated purchase price;

b)     When purchasing an item – keep its receipt and record the above information;

c)     Maintain a detailed depreciation schedule that lists all of your tools etc;

 

Then, should you have a loss you will be able to easily prove what was stolen and what it was worth.


Whilst maintaining a detailed depreciation schedule may seem like a lot of hard work, businesses can claim depreciation costs as a tax deduction. To claim depreciation costs you must identify what items you are depreciating. Maintaining a list will not only make life easier if they get stolen but may also produce some additional income through an increased tax deduction!


Another issue for you to consider is what protection exists for your tools once you take them offsite?


Perhaps you should consider purchasing the additional cover of Australia Wide?


If your current policy does not include cover for Construction Plant, Machinery, Equipment and Tools – at no additional cost, then give us a call on 1800 077 933 - it should!

 
 

BOVILL RISK & INSURANCE CONSULTANTS

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