Contractor’s Equipment: Be careful when determining values

June 22, 2023

Supply chain disruptions, labor shortages, and inflation are having quite an impact
on the contractor’s equipment market. As production has slowed and demand
for used equipment has increased, the market value for both new and used
equipment has climbed.

When we talk about used vehicles, we are all familiar with depreciation. We are
all told that a vehicle depreciates as soon as it is driven off the dealer’s lot.
Depending on the make and model, it can depreciate anywhere between 10-15%.
As a result of the shortage of supplies during the pandemic, this has not been the
case. According to auto industry statistics, used vehicles are now 67% more
expensive than they were pre- pandemic.

Construction equipment values have also been affected; with demand high and
supplies limited, used equipment values will stay high. Contractors are keeping
their used equipment longer instead of buying new, which also limits the
availability of used equipment in the market, further elevating values.

When purchasing insurance to cover contractor’s equipment, some contractors
will low ball equipment valuations, fearing high insurance costs and knowing that
total losses are rare. However, when seeking protection on your equipment, it is
very important to adequately insure equipment according to today’s market
conditions, and not based on past depreciation factors.

Furthermore, Contractor’s Equipment policies often include a coinsurance clause. The intent
behind coinsurance is to avoid inequity in pricing so to encourage contractors to
carry a reasonable amount of insurance in relation to the value of the property or

If the values that the insured reports to the Insurance company do
not meet the specific coinsurance level, their claim will be subject to a
coinsurance penalty, meaning only a percentage of the loss will be covered.

There are different ways for contractors to value equipment. Formal appraisers
can be used or contractors can access up-to-date valuation tools via on-line
sources or websites like or Ritchie Bros Auctioneers.

To understand policy coverage and how claims are adjusted under a Contractor’s
Equipment policy, please contact Jennifer at (732)-946-9300.