Insuring Your Equipment and Inflation’s Impact on Values

If your business, team, or league uses any type of valuable equipment, you should strongly consider insuring it properly to protect yourself and your business from a variety of unfavorable circumstances.

Understanding the ins and outs of equipment insurance can be overwhelming. This article will highlight the importance of equipment insurance, how it can help your business, and how inflation plays a significant role in valuating and insuring your equipment.

Top Reasons to Insure Your Valuable Sports or Business Equipment

Equipment insurance is crucial. Neglecting to attain equipment insurance can lead to severe financial difficulties and even the loss of your business, team, or league. The sections below explain the importance of equipment insurance and the top reasons to acquire a comprehensive policy.

To Lessen Financial Risk

One of the primary reasons for insuring your valuable business equipment is to lessen your financial risk. Purchasing, financing, renting, and leasing substantial equipment is often massively expensive, and if something goes awry, it could put your business or league, or organization in jeopardy.

Everything from theft to natural disasters to a dip in the economy could leave you in a difficult situation, but having your pricey equipment insured can lessen the financial impact of such events.

If you lease your equipment and it gets stolen without insurance, you are still financially responsible for completing the lease and returning the equipment or paying the entire cost. If your high-end equipment gets severely damaged beyond repair, if you don’t have insurance, you will have to buy new equipment with money out of your pocket.

The scenarios where insurance could be the difference between your business carrying on successfully or falling into financial ruin are endless and unpredictable. Acquiring a modest but comprehensive policy now can save you thousands of dollars in the future and protect your business from elements out of your control.

To Secure Financing

Insurance is beneficial whether you purchased your equipment outright, are in a long-term lease, or plan to rent for short periods. However, equipment insurance is especially crucial if you take out a loan or obtain financing for your equipment.

Many lenders and financers will not offer or guarantee a loan without proof of insurance to ensure their investment is protected to some degree. Insurance gives lenders peace of mind and shows that their assets are protected, making it substantially easier to secure the funding you need to make your business successful.

Legal Requirements

Depending on the type of equipment you’re ensuring, you may be legally required to have insurance. In this case, you don’t have any option and must get insurance. Otherwise, you may find yourself in legal trouble.

The legal requirement for insurance on certain types of equipment can vary state by state or even city by city, so look into your local laws and regulations when purchasing equipment.

What Equipment ESP’s Insurance Offerings Can Cover

What your equipment insurance covers will depend on your specific policy and the type of equipment you’re insuring. Equipment insurance policies can cover the following:

  • Theft
  • Repairs
  • Replacement
  • Lost Equipment
  • Vandalism
  • Transportation
  • Weather Related Disasters.

This type of coverage often falls under commercial property policies, but with general liability insurance for your equipment, you can also have legal liability to third-party participants and third-party property damage covered. Liability insurance could protect you from lawsuits if equipment malfunctions while in use and injures someone or worse.

The Effects of Inflation on Equipment Values and Insurance

Just like everything else, the value of your equipment and, therefore, the cost of insurance, is directly impacted by inflation. The COVID-19 pandemic led to supply chain disruptions, inflation, and labor shortages, creating significant changes in the equipment market.

The demand for equipment is extremely high, but the supply of equipment is relatively low, driving the value of equipment sky-high. While this is excellent news for people selling valuable equipment, it can make insuring equipment more complex but also exponentially more important.

For example, if you purchased a piece of equipment in late 2019 that was worth $1,000, if it’s still in quality condition, it may be worth even more now. So, insuring this item at a $1,000 valuation may leave you underinsured.

The Bureau of Labor Statistics has reported that the Consumer Price Index (CPI) increased by 4.7% in 2021 and then again by 8% in 2022. On average, the value of equipment has risen by 16%. This increase is substantial and must be considered when shopping for equipment insurance. If you decide not to have your equipment professionally appraised, ensure you factor in this 16% cost increase, as well as any future inflation patterns.

Types of Equipment You Should Insure

If you’re contemplating whether or not your business equipment needs insurance, here is a list of some common types of equipment that should be covered.

  • Sports Teams, Leagues & Clubs
  • Arcade Insurance
  • Batting Cage Insurance
  • Bowling Alley Insurance
  • Driving Range Insurance
  • Escape Room Insurance
  • Laser Tag Insurance
  • Mini Golf Insurance
  • Multi-Sports Complexes
  • Tennis Club Insurance

These are just some of the top types of equipment you should insure, but when in doubt, adding coverage for your expensive and valuable equipment is a smart decision. Reach out today to discuss your insurance needs and how ESP Specialty can help.

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