“We only provide insurance for portable hand tools as part of a motor trade combined package”
One of our recent news articles was about underinsurance in general, however we decided to take this a little further as there appears to be a huge issue about Motor Traders Portable Hand Tools Insurance.
As motor trade insurance specialists, you would expect we know a few things about the types of machinery and tools used in a workshop whether that be a Service and Repair garage or a Bodyshop.
We’re not going into great depths generally about underinsurance here as this is a huge subject, below is short description, however, you can get a much wider idea about the issues – CLICK HERE
What is a portable hand tool?
Motor Traders Portable Hand Tools are sockets, spanners, air tools, electric tools, diagnostic equipment but also the toolbox’s themselves for which the tools are kept, something that can confuse, clearly, it’s not a tool!
The problem is that its not widely understood exactly what a portable tool is when it comes to things to be insured. The fact that it is portable though doesn’t necessarily mean that it should be included under the portable hand tools insurance policy. Confused, you’re not on your own.
Insuring the toolbox, for many mechanics having that cool toolbox is a must, brightly coloured with the manufacturer’s logo all over it, you know the one’s, almost a designer label, I guess in motor trade terms it probably is. These come in many sizes and need to be insured along with the tools and diagnostic equipment.
What’s in your toolbox? Forget manufacturers marques for a minute, let’s get to the nitty gritty of what’s in the box. We will be looking at values as well shortly so make a mental note of what’s in there. There are some very easy ways to obtain values without too much effort depending on the makes of your tools.
So, sockets, spanners, special tools, anything that is handheld, simple things like hammers, chisels, pullers, and all the little things you forgot you had, this should also include the special diagnostic tools such as plug ins and similar with their associated software, in fact anything that is used for diagnostic analysis for use on a vehicle.
Air tools, these will include DA’s, Drills, Cutters and Spray Guns, anything that is air fed.
When is a portable Hand Tool NOT a Portable Hand Tool?
Its very easy to misunderstand what goes in what section on an insurance schedule, we know this because not only is the customer confused, the matter has been made worse by the advice they have been given.
The key two parts are portable hand tools and machinery and plant. Unfortunately, this is where confusion can sometimes arise, a toolbox isn’t a hand tool but it does come under a hand tool definition, a small TIG welder, yes you can carry this around but you wouldn’t necessarily put this within hand tools despite it being portable.
Motor Manufacturers special tools
Not every motor trader has these unless you are specialising in a particular motor manufacturer. The problem is that whilst they do have a value, what is that value, for some of the tools it may be years since they last saw the light of day, so what do you do with them, how do you value them?
Many are now obsolete, so how do you put a value on these. Unfortunately, there isn’t an easy answer to that, is a replacement obtainable, if so, what is its cost to replace, you can’t replace it as new, so you have few choices.
For these there is no easy answer other than to discuss with us what you have, there are options which are too complex to go into detail here. The point is though, be aware you have them and ensure they are insured in some way, reinstatement cover (new for old), indemnity cover (new cost less wear and tear) or specifically exclude them from the list of portable hand tools if you place no value on them or wouldn’t replace them if a loss occurred.
There is a reason to specifically exclude them if you have them but choose not to cover them, in the event of a loss an insurer could take them into account and render you under insured.
How much should portable hand tools be insured for?
Portable Hand Tools should be insured for the value to replace or reinstate them as new without betterment. It should be the manufacturers or suppliers retail price without discounts or special offers.
However, the simple answer, how long is a piece of string? Before we look at this piece of string, let’s just remind ourselves how the hand tools need to be insured.
Underinsurance is a huge issue, and the contents of your toolbox is no exception. The amount that you insure for MUST represent the cost to completely replace the tools you have as NEW.
The misconception still exists that if you insure your tools for let’s say £3,000 (example) that in the event of a loss the insurer will just give you a cheque for £3,000, this isn’t the case.
So here is a (very) very simple example: If the correct replacement value to replace the tool box and all its contents is £6,000 and it was stolen and you had only insured for £3,000 this means that you would be half underinsured, the insurer would only pay 50% of the amount of loss, £1500 in this case less any excess. It’s called the Average Clause, look it up in your policy. Almost all insurance policies have this clause.
Think about this if your tools are in the tens of thousands!
If you haven’t already seen our article on underinsurance, this is the very reason why you need to know what’s in your toolbox, what is a portable hand tool and what is its replacement value.
The toolbox, how much is it to replace all the toolboxes in your premises? These come in all shapes and sizes, from the budget to the hugely attractive massive boxes that are almost workshops in their own right.
What is the cost to replace it? This should be the cost as if you bought new without any discounts, no special offers, no part exchanges, no mates rates but the actual “as new” cost.
The contents of the toolboxes, this is where the fun starts, this can be a very simple process but also very difficult if you have every brand name under the sun.
The difficult method unfortunately is to go through each draw and add up the replacement cost of the items, many you will have had for years so when you obtained it for just a few pounds, it could now be twenty pounds, it’s up to you to establish the replacement cost, again as new, without special discounts not what you can get if for as a special deal on an auction site but the full retail cost of the piece.
The easy way… for many who purchase their tools on a monthly basis from the mobile tools’ shops you’re in a great position. Mr Mobile Tools Shop man, big van, franchised operation, from the USA (I can’t use their real names for fear of some breach of something that someone will dream up) but let’s call them “Break Off” (get what I did there) might not love you for asking, but what you need to do is ask how much you have spent with them over the years. Tell them that its for insurance purposes and they will probably advise you a percentage to add on the top, 25% to 35% is not unusual.