As a tradie your tools are very important to your business. If your tools are stolen or damaged, then you simply can't do your job; buying replacements can be expensive. Luckily, you can insure your tools as part of your general trades business insurance.
So, if you do need to get new tools then you'll at least have an insurance payment to cover the cost. Before you choose a policy, you do need to check what kind of payment you'll get. What are your options with tools of trade coverage on your trades insurance?
Your tools lose value over the years – this is known as depreciation. If your trades insurance coverage pays on a depreciation basis, then you get a payment based on the value of the tool when you claim for it rather than for its original cost or the cost of a new replacement.
So, for example, say you bought a tool for $500 a year ago. If your insurance company estimates that the tool will depreciate by 5% in that year, then your payment will total $475.
New for Old Payments
Some business trades insurance covers tools on a new for old basis. Basically, this means that you claim for the cost of buying the tool new when you need to replace it.
So, if the tool now costs $550, your insurance company will pay this amount. However, if the tool has gone down in value over the years and you'd only need to pay $400 for it now, then this is the money you'd claim.
Choosing the Right Tools Cover
It's important to choose the right type of cover for your tools. If money is tight and your tools are generally expensive, then new for old cover may be your best option. This way you won't lose out if you do need to buy replacements.
This may be especially important if you have a lot of older tools that you've used for years. They may have depreciated in value a lot compared to the cost of replacement. While your insurance payment will cover some of your costs, you may end up out of pocket.
On the other hand, depreciation cover may be worth considering if you want to save money on insurance costs. Typically, you may find that your policy costs are a bit lower if you aren't paying for new for old cover.
If you aren't sure which way to go, ask your insurance company or broker for advice. They can help you assess your tools and replacement costs and help you decide which is the best option.