I’m a contractor working on dry land in California. Why would I need something called inland marine insurance?

There is a long story behind the name. It has to do with the history of the insurance industry and with who insured what, at sea and on land. The easiest way to think of it today, where California contractors are concerned, is as insurance for things that float around, or are moved from place to place—most notably your tools and equipment. It can also cover things like blueprints in the trunk of your car, or data on the laptop you take back and forth between your shop and your work locations. You may need broader protection for such items than your regular business policy may provide.

Inland marine insurance covers you when you losevaluable tools, equipment, materials, or other itemsto a thief, fire, flood, or other unwelcome event. They are covered wherever they are—on a job site, in a truck or car, or at your place of business, for example. Your regular business insurance may protect you if a backhoe or power saw mysteriously disappears from your shop. But it may not pay off if the theft occurs at a construction site, or on the way to or from a job.

Inland marine insurance may also cover the loss of property belonging to someone else, such as scaffolding or a piece of heavy equipment you may have rented for the duration of a job. Some policies may cover tools and equipment owned by your employees.

A specific form of inland marine insurance, called builder’s risk insurance, also provides coverage for a contractor’s unfinished construction projects.

Does the inland marine insurance sold in California cover old tools and equipment, or just new ones?

Carriers often place a limit on the age of items that can be covered under a contractor’s inland marine policy. For example, a policy might only cover items that are five years old or less.

Is there a limit to how much a carrier will reimburse me for if I submit an inland marine insurance claim for something that was stolen or destroyed?

You will typically be reimbursed for the replacement cost of the item, taking into account its age and depreciation. When a contractor purchases inland marine coverage in California, the insurance carrier asks for an inventory of the items to be insured. You want to be sure to list the current age of each, because replacement cost is based on actual current value, not its original purchase price. The higher the current value, the more you will pay in premiums. You don’t want to pay to insure an older piece of equipment for more than it is worth now, because you will only be reimbursed for what it is worth now, not what a new one would cost today.