Tool insurance for tradies: the conditions that decide a claim
Tool insurance pays to repair or replace your tools and portable equipment if they're stolen or damaged, on site, in your ute or at home. Insurers call it portable equipment, portable and valuable items, general property or tools of trade cover, and sell it on its own or as a section of a tradie or business package. Most tool claims turn on the policy's conditions, not its headline sum insured: how it treats theft from a vehicle, the limit for any one item, and whether it pays new-for-old.
This page sets out the conditions to check, using one current policy as a worked example: GIO's Business Protect PDS (prepared 28 March 2024), issued by AAI Limited. Other insurers word their conditions differently, so read the same sections in any policy you're offered. For the rest of a trade business's cover, see tradie insurance.
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What tool insurance covers
Tool cover pays for accidental loss of or damage to the tools and equipment you list, including theft, within the policy's conditions. In the GIO Business Protect wording, the Portable and Valuable Items section covers items you usually carry with you in the course of your business, against accidental loss or damage anywhere in the world.
Most policies split your tools into two groups. Unspecified items are covered up to a set amount each without being listed; GIO's limit is $2,500 per item, and its business pages describe the same $2,500 per item for AAMI and GIO tradie cover. Anything worth more must be listed as a specified item, with its value, to be replaced in full.
Theft from your ute or van: the conditions that matter
Theft from a vehicle is where tool claims most often fail, because policies set conditions on how the tools were secured and how the thief got in. The GIO wording, for example, doesn't cover theft from a building or vehicle unless one of these applied:
- The tools were securely locked in the vehicle and the theft followed forcible and violent entry to it.
- The tools were securely fixed to the vehicle and were removed by force.
- The tools were chained to the vehicle with a steel chain (link diameter of 10mm or more) and a padlock.
- The tools were locked in a building and the theft followed forcible and violent entry to it.
- They were stolen in an armed hold-up or under threat of violence.
Theft without forced entry
Some policies sell cover for theft without signs of forced entry as an option, with its own limits. GIO's optional cover pays up to $2,000 for any one event and $6,000 in total in a policy period, and doesn't cover items left in the open air for more than 24 hours at the same place. Without it, a theft from an unlocked ute or an open site usually isn't covered.
Tools left in the open
Theft of unattended items in the open air is a common exclusion. The GIO wording excludes it, so tools left on an open site or in the tray of a ute overnight are at risk unless they're secured as the policy requires.
New-for-old or indemnity: what a claim pays
Check how the policy values a claim. A new-for-old basis pays to replace an item with a new equivalent; an indemnity basis pays its depreciated value, which can be a fraction of the cost of a replacement for an older tool.
In the GIO wording, the insurer pays the amount on your proof of purchase for specified items, or the reasonable cost of repairing or replacing an item to a condition substantially the same as, but not better than, when it was new. It settles by paying you, rather than replacing the tool itself, so keep receipts and photos of your tools and their serial numbers.
What tool insurance usually doesn't cover
Exclusions vary, but these appear in most wordings. All of these are in the GIO example:
- Loss or damage to tools of trade while they're in use.
- Wear and tear, gradual deterioration, and mechanical or electrical breakdown.
- Theft by your family or employees while they're lawfully on the premises.
- Theft of unattended items in the open air, and theft from a vehicle or building without the required security and forced entry.
- Any single unspecified item above the per-item limit ($2,500 in the GIO wording).
- Faulty materials or workmanship, and scratching or denting that doesn't affect how the tool works.
Tool insurance vs home contents and car insurance
Don't assume another policy picks up your tools. Home contents policies often limit or exclude items used for business, and cover at home may not extend to a job site or your ute. A car or commercial motor policy covers the vehicle; tools inside it generally need their own cover, or are limited to a small amount for personal items.
If you hire or borrow equipment, check whether the policy covers property you don't own. The GIO wording adds limited theft cover for other people's equipment in your control for business: up to $2,000 a year in total.
| Condition | What to ask | GIO Business Protect (PDS prepared 28 March 2024) |
|---|---|---|
| Where tools are covered | On site, in the vehicle, at home, interstate? | Anywhere in the world, subject to the theft conditions |
| Single-item limit | How much each unlisted item is covered for | $2,500 per unspecified item; list items worth more |
| Theft from a vehicle | Does it need locked doors, forced entry, a lockbox or chain? | Securely locked and forcible entry, securely fixed, or chained with a 10mm steel chain and padlock |
| Theft without forced entry | Is it covered, and to what limit? | Optional: $2,000 an event, $6,000 a policy period |
| Tools in use | Is damage while you're using a tool covered? | Excluded for tools of trade while in use |
| How claims are paid | New-for-old or depreciated value; cash or replacement? | Proof-of-purchase amount for specified items, or the cost to repair or replace to as-new condition; paid in cash |
| Other people's equipment | Are hired or borrowed tools covered? | Theft cover up to $2,000 a year in total |
What to watch for
- Lock tools in the vehicle or a fixed lockbox, and keep receipts, photos and serial numbers: most theft claims depend on proving both the security and the value.
- List every tool worth more than the per-item limit as a specified item.
- Ask whether theft without forced entry is covered, and buy the option if you can't always lock up.
- Check whether damage while a tool is in use is excluded before you rely on the policy for breakages.
- Don't rely on home contents cover for tools you take to work.
Common questions
Does tool insurance cover theft from a ute?
Usually, but only if you meet the policy's security conditions. Many policies require the tools to be locked in the vehicle with signs of forced entry, or fixed or chained to it. The GIO Business Protect wording, for example, also sells optional cover for theft without forced entry, up to $2,000 an event.
Does my car insurance cover my tools?
Usually not, or only up to a small limit for personal items. Tools of trade generally need their own cover under a tools, portable equipment or portable and valuable items policy. Check your motor policy's contents limit and exclusions.
Do I need to list every tool?
Only the valuable ones. Policies cover unlisted (unspecified) items up to a per-item limit, such as $2,500 in the GIO and AAMI tradie cover, and anything worth more must be listed with its value to be replaced in full.
Are tools covered while I'm using them?
Often not. The GIO wording excludes loss or damage to tools of trade while they're in use, and other policies have similar exclusions, so a tool that breaks on the job may not be covered. Check the exclusions before you buy.
Is tool insurance tax deductible?
The ATO lists business insurance premiums among the operating expenses a business can generally deduct, and tools cover for your business falls within that. Check your own situation with your accountant.
General information only
This page explains how tool insurance generally works, using one insurer's wording as an example. It isn't a recommendation of that policy or any other. Read the Product Disclosure Statement and Target Market Determination of any policy you consider.
