The Importance of Insuring Equipment to Value

By Ray Rogers, Property Claims Director and Stephen Hicks, Vice President of Underwriting

Failing equipment can shut down an entire business, and maybe not for the reasons you think. Too often insureds knowingly and unknowingly operate with equipment that is grossly undervalued and underinsured only to later learn they are on the hook for hundreds of thousands, and even millions of dollars when equipment fails and business is already interrupted as a result.

Lumber equipment prices fluctuate. Contributing factors for this include supply and demand, technology improvements, inflation, depreciation, tariffs and more. Accurately insuring equipment to value protects a lumber business’s bottom line, allowing them to be fully indemnified in the event of a loss. If equipment is undervalued, the insured is not covered for the full replacement costs of that equipment. In the event of damage or a loss, the business owner may be paying out of pocket for the difference between the insured value and the actual replacement value, presenting an unexpected and, sometimes, large expense. Further, failing to insure equipment to value can result in penalties for not being properly insured.

To avoid these risks and maintain the most accurate coverage, Pennsylvania Lumbermens Mutual Insurance recommends an annual review of equipment valuations. Consider the following practices to ensure equipment is insured to the most accurate value:

• Regular Maintenance: Maintaining upkeep can help limit depreciation and stabilize the value of equipment.
• Monitor Economic Events: As a general rule, it is a good idea to evaluate equipment any time there is a major economic event such as a surge in inflation, tariff policy changes or national elections.
• Secure Equipment Records: Make sure all documentation for your equipment, such as original purchase agreements and other important records are stored in a secure location and backed up to the cloud in case of an emergency.
• Perform Regular Research: Research equipment values bi-annually to annually to ensure your insurance is as up to date as possible.
• Consult Your Broker: Ask your broker to discuss values based on your company’s specific equipment and when to review values or update coverage.

One of the most important assets in a lumber business is the equipment used to run the business. While it can be tempting to try to reduce insurance premiums or make assumptions about the value of a truck, forklift or loader, it’s important to remember that without equipment, a business’s operations, and its reputation, can be damaged. Take the first step by speaking to an insurance professional about your current insurance portfolio and the value of your lumber business’s equipment.