Tool insurance for employees: whose tools are covered?

You've put someone on, or the apprentice starts Monday. Their van gets done over on Thursday with your gear and their gear inside. Whose insurance pays for what? The answer hangs on one thing: who owns the tools, not who was using them.

The general rule: ownership decides

A business tool policy covers the tools the business owns. If your employee is running your drill and it gets nicked from a locked site box, that's a claim on your policy, same as if you'd been holding it.

Their own personal tools are a different story. An employee's or apprentice's own kit generally isn't covered by the boss's policy unless the policy specifically extends to it. Some insurers offer that extension. Most don't include it by default. So before anything goes missing, everyone on the crew should know which bucket each toolbox sits in.

Your tools in their hands

Handing gear to an employee usually doesn't void your cover, but the policy conditions travel with the tools. The usual ones:

• Security conditions still apply. If the policy wants tools locked in a vehicle or site box, that goes for their vehicle too.
• Overnight-in-vehicle exclusions still apply, wherever the vehicle is parked.
• Some policies restrict cover to named locations or named vehicles. If your gear now lives in a second ute, tell your insurer.

Worth a five-minute chat with your insurer the week you put someone on: "my tools are now carried in two vehicles, is that covered?" Cheap question. Expensive assumption.

The apprentice's own kit

Apprentices usually build up their own tools from day one, and those tools are theirs. Three common ways it gets handled:

• The apprentice insures their own kit. Standalone tool policies exist for exactly this.
• The boss asks the insurer to extend the business policy to employees' tools, where that option exists, and lists the gear.
• Nobody insures it and nobody realises until the break-in. The common one. Avoid it.

Whatever you land on, put it in writing between you, even just a text. "Your tools are on your policy, mine are on mine" saves an ugly conversation later.

Don't mix this up with workers comp

Tool insurance covers gear. Workers compensation covers people, and once you employ someone it's generally compulsory, run state by state through schemes like WorkCover. Putting on your first employee usually means sorting workers comp, tax withholding and super, and none of those live inside a tool policy. Check your state's WorkCover authority and your accountant for what applies to you.

Before a claim ever happens

• Keep a tool list per person: what's business-owned, what's personal, serial numbers where they exist.
• Photograph both kits. Takes ten minutes at smoko.
• Check your policy schedule for a tools or portable equipment section, its dollar limit, and whether employees' property is mentioned at all.
• Update the list when someone buys something big.

This is general information, not insurance, tax or legal advice. Policies and state rules differ, so check your product disclosure statement and talk to an insurer, broker or your accountant about your situation.