In most cases, yes. When you buy new equipment, it's a good time to update your business insurance, because your property limits were set based on what you owned when the policy was written. A new commercial oven, a CNC machine, a set of work laptops, or a piece of diagnostic gear can quietly push the value of your business property past what your policy will actually pay.
At Knight Insurance Services, we've helped businesses across Greater Los Angeles and LA County protect what they've built since 1922. In this blog, we'll explain why new equipment can create a coverage gap, which parts of your policy it affects, and what to have ready when you call your agent.
Most commercial property policies insure your equipment under a category called business personal property. The California Department of Insurance describes it as "furniture; fixtures, machinery, and equipment not permanently installed; inventory; or any other personal property owned by and used in your business."
That coverage comes with a dollar limit. If you set the limit at $150,000 two years ago and have since added $60,000 in new equipment, the policy doesn't automatically grow to match. After a fire, theft, or major water leak, you could be left paying the difference out of pocket.
A few purchases can also change your risk in ways that go beyond the dollar amount, such as equipment that travels to job sites, runs on high voltage, or keeps your whole operation running.
This is the first place to look. Your commercial property insurance limit should reflect the current cost to replace everything you own, not what you paid for it years ago. Some policies also cap specific categories, such as electronics, at a lower sublimit. We covered that issue in more detail in our post on why business computers may not be fully covered by property insurance.
Standard property policies are built around outside events like fire or theft. They typically don't respond when a machine fails on its own because of an electrical surge, motor burnout, or mechanical breakdown. Equipment breakdown coverage, sometimes called boiler and machinery insurance, is designed for that. The California Department of Insurance notes that it "covers business property, other property losses, and legal fees (if any) that may result from the malfunction of boilers and machinery."
If your new equipment goes out on jobs, such as tools, generators, cameras, or diagnostic kits, a property policy tied to your address may offer limited protection once it leaves the building. Inland marine coverage is designed for property in transit or at temporary locations. According to the Insurance Information Institute, "tools and equipment that travel with employees to nearby job sites may also be covered."
When one machine drives most of your revenue, losing it can shut down operations for weeks. Business income (business interruption) coverage can help replace lost income while covered property is repaired or replaced. If your new equipment has become that critical, it's worth reviewing whether your current business income limit still fits.
If the "equipment" is a work truck, van, or trailer, it belongs on your commercial auto insurance policy, not your property policy. Add it before it goes into service.
Two policy details can make a big difference when you file a claim on new equipment.
Adding new equipment without raising your limit is one of the most common ways businesses fall short of a coinsurance requirement without realizing it.
It depends on your lease or loan agreement. Many lenders and leasing companies require the borrower to insure the equipment and to list them as a loss payee on the policy. Some leases make the lessor responsible instead. Either way, send your agent a copy of the agreement so the coverage matches what you signed and the lender receives proof of insurance on time.
You don't need to call about every stapler. These are the situations where a review usually makes sense:
Keeping this information in one place, along with photos, can also make a future claim much easier to document.
Businesses in LA County deal with risks that make accurate equipment coverage especially important. Wildfire has become a real concern for communities along the foothills, and many standard exclude earthquake damage, so it's worth asking your agent how those risks apply to your location. Equipment theft from job sites, vehicles, and storage units is another common source of loss for contractors and service businesses across the region.
New equipment is an investment in your business's growth. Updating your business insurance after buying equipment helps make sure that investment is protected if something goes wrong. Need help reviewing your coverage? Call us at (818) 662-4200 or contact us today to speak with the team at Knight Insurance Services.
Also read: How to Choose the Right Commercial Property Insurance Policy for Your Business?
Our team of friendly professionals are always on hand to help. Can't wait? Give us a call at (818) 662-4200.
Not for every small purchase. A review makes sense when new equipment noticeably increases the value of your business property, will be used off-site, or is critical to your operations.
Usually not. Standard property policies typically exclude mechanical or electrical breakdown. Equipment breakdown coverage is generally added separately or by endorsement.
Coverage away from your premises is often limited. Inland marine coverage is commonly used for tools and equipment that travel to job sites.
Your lease agreement decides this. Many leases require the business to insure the equipment and name the lessor as a loss payee.
