Construction Plant Insurance: Owned vs Hired-In Equipment

Construction plant and equipment represent significant investments for any building or civil engineering company. Whether you own your machinery outright or regularly hire equipment for specific projects, protecting these assets is critical to your business continuity and financial stability. This comprehensive guide explores the differences between insuring owned versus hired-in equipment, helping you make informed decisions about your construction plant insurance strategy.

Understanding Construction Plant Insurance

Construction plant insurance is a specialized form of business insurance designed to protect machinery, equipment, and tools used in construction and civil engineering projects. This coverage extends beyond standard business insurance policies and addresses the unique risks associated with heavy equipment operation, transportation, and storage on construction sites.

The scope of construction plant insurance typically includes:

• Excavators, bulldozers, and earthmoving equipment

• Cranes, hoists, and lifting equipment

• Concrete pumps and mixing equipment

• Compressors and power tools

• Scaffolding and temporary structures

• Generators and temporary power supplies

• Site accommodation and welfare facilities

Understanding the distinction between owned and hired equipment is essential because each category presents different risk profiles and insurance requirements.

Owned Equipment: Coverage Considerations

When you own construction plant and equipment, you bear full responsibility for its protection and maintenance. Owned equipment insurance provides comprehensive coverage for machinery you've purchased and operate as part of your business assets.

Advantages of Owning Equipment

Ownership offers several financial and operational advantages. You avoid recurring hire charges, maintain consistent equipment availability, and build equity in valuable assets. Long-term projects benefit from dedicated machinery that's always ready for deployment. Additionally, owned equipment can be depreciated for tax purposes, providing potential financial benefits.

From an insurance perspective, you have complete control over maintenance schedules and safety protocols, which can positively influence your premiums. Insurers often offer better rates for well-maintained, regularly serviced equipment with documented safety records.

Risks Associated with Owned Equipment

Ownership brings significant responsibility. You're liable for all damage, theft, and mechanical breakdown. Equipment depreciates over time, and older machinery may require increasingly expensive repairs. Storage and security become your concern, particularly during project downtime. Additionally, you must maintain comprehensive maintenance records to satisfy insurance requirements and ensure equipment reliability.

Seasonal fluctuations can leave expensive equipment idle for extended periods, tying up capital without generating revenue. Weather damage, vandalism, and theft pose constant risks, particularly on exposed construction sites.

Insurance Coverage for Owned Equipment

Standard owned equipment policies typically include:

• All Risks Coverage: Protection against accidental damage, theft, and malicious damage

• Breakdown Coverage: Mechanical and electrical failure protection

• Transit Coverage: Protection while equipment is being transported between sites

• On-Site Coverage: Protection while equipment operates on construction sites

• Storage Coverage: Protection at depots, yards, and storage facilities

Premiums for owned equipment typically range from 5-15% of the equipment's replacement value annually, depending on equipment type, age, usage intensity, and your claims history.

Hired-In Equipment: Coverage Considerations

Hiring equipment offers flexibility and cost efficiency for short-term projects or when you need specialized machinery infrequently. However, hiring introduces different insurance considerations and contractual obligations.

Advantages of Hiring Equipment

Equipment hire provides significant operational flexibility. You access modern, well-maintained machinery without capital investment. Hire companies handle maintenance and repairs, reducing your operational burden. For specialized equipment needed occasionally, hiring is far more cost-effective than ownership. Additionally, you avoid depreciation concerns and storage challenges.

Hiring also provides scalability—you can quickly increase or decrease equipment availability based on project demands without being locked into ownership costs.

Risks Associated with Hired Equipment

Hired equipment introduces contractual complexities. Most hire agreements include damage liability clauses making you responsible for damage during the hire period. You're typically liable for theft and loss unless the hire company's insurance covers these scenarios. Hire charges accumulate quickly on long-term projects, potentially exceeding ownership costs.

You have limited control over equipment maintenance schedules, though reputable hire companies maintain rigorous standards. Disputes over damage responsibility can create tensions with hire companies and complicate insurance claims.

Insurance Coverage for Hired Equipment

Hired equipment insurance typically covers:

• Damage Liability: Your responsibility for damage to hired equipment

• Theft Protection: Coverage if hired equipment is stolen from your site

• Accidental Damage: Protection against unforeseen damage during operation

• Loss Coverage: Protection if equipment is lost or goes missing

Many hire agreements require you to maintain specific insurance levels. Costs typically range from 2-8% of the hire value, though this varies significantly based on equipment type and hire duration.

Key Differences in Coverage

Several critical differences distinguish owned and hired equipment insurance:

Responsibility and Liability

With owned equipment, you're responsible for all aspects of protection and maintenance. With hired equipment, responsibility is shared—the hire company maintains the equipment, but you're typically liable for damage during the hire period. Understanding your contractual obligations is essential.

Maintenance and Breakdown

Owned equipment insurance often includes breakdown coverage for mechanical failures. Hired equipment typically excludes breakdown coverage, as the hire company assumes maintenance responsibility. However, you may be charged for repairs if damage results from negligent operation.

Depreciation

Owned equipment depreciates, affecting replacement value calculations and insurance settlements. Hired equipment has no depreciation concern for your business, as you never own it.

Claims Process

Owned equipment claims are straightforward—you claim directly from your insurer. Hired equipment claims can be complex, involving the hire company, their insurer, and your insurer, potentially creating disputes over responsibility.

Cost Comparison: Owned vs Hired Equipment

Financial analysis should consider both insurance costs and operational expenses:

Owned Equipment Annual Costs:

• Insurance premium: 5-15% of replacement value

• Maintenance and servicing: 2-5% of replacement value

• Storage and security: Variable

• Depreciation: 10-20% annually for newer equipment

Hired Equipment Annual Costs:

• Hire charges: 30-50% of equipment value monthly

• Damage liability insurance: 2-8% of hire value

• No maintenance costs (hire company responsibility)

• No depreciation concerns

For equipment used fewer than 100 days annually, hiring is typically more economical. For equipment used 200+ days annually, ownership usually provides better value.

Best Practices for Construction Plant Insurance

Comprehensive Documentation

Maintain detailed records of all equipment, including purchase dates, serial numbers, maintenance history, and current condition. Photograph equipment regularly and document any damage. This documentation supports insurance claims and demonstrates your commitment to proper maintenance.

Regular Safety Inspections

Conduct thorough safety inspections of all equipment according to manufacturer specifications and regulatory requirements. LOLER (Lifting Operations and Lifting Equipment Regulations) compliance is mandatory for lifting equipment. Document all inspections and remedial actions.

Operator Training and Competence

Ensure all operators hold appropriate certifications and training. Many insurers offer premium discounts for companies with comprehensive operator training programs. Well-trained operators reduce accident risks and damage claims.

Site Security Measures

Implement robust security protocols to prevent theft and unauthorized use. Use locked storage areas, security fencing, and surveillance systems. For high-value equipment, consider GPS tracking devices. Insurers often reduce premiums for sites with strong security measures.

Hire Agreement Review

Carefully review all hire agreements before accepting equipment. Understand your liability for damage, the hire company's insurance coverage, and dispute resolution procedures. Clarify whether the hire company's insurance covers theft and loss or if you must provide this protection.

Insurance Policy Review

Review your construction plant insurance annually. Ensure coverage limits reflect current equipment values and your operational needs. Discuss your specific requirements with your insurance broker to ensure adequate protection.

Regulatory and Compliance Considerations

Construction plant insurance exists within a regulatory framework that affects coverage requirements:

LOLER Compliance: Lifting equipment must comply with LOLER regulations, including thorough examination by competent persons. Insurance policies typically require LOLER compliance as a condition of cover.

Health and Safety at Work Act: You have legal obligations to maintain equipment in safe working condition. Insurance policies may exclude claims arising from failure to meet these obligations.

Supply of Machinery (Safety) Regulations: Equipment must meet safety standards. Non-compliant equipment may be uninsurable or subject to premium penalties.

Environmental Regulations: Proper storage and maintenance prevent environmental damage. Some policies include environmental liability coverage.

Making the Ownership Decision

Deciding between owning and hiring equipment requires careful analysis of your specific circumstances:

Choose Ownership If:

• You use equipment regularly (200+ days annually)

• You operate specialized equipment others rarely need

• You want consistent equipment availability

• You have secure storage facilities

• Your projects are long-term and predictable

Choose Hiring If:

• Equipment usage is irregular or seasonal

• You need specialized equipment occasionally

• You prefer minimal maintenance responsibility

• You want flexibility to scale operations

• Capital availability is limited

Many successful construction companies use a hybrid approach, owning core equipment while hiring specialized or temporary machinery for specific projects.

Conclusion

Construction plant insurance is essential for protecting your business assets and ensuring operational continuity. Whether you own or hire equipment, understanding the specific coverage requirements, risks, and costs associated with each approach enables you to make informed decisions that align with your business strategy and financial objectives.

Owned equipment provides control and long-term value for frequently used machinery, while hired equipment offers flexibility and cost efficiency for occasional or specialized needs. The optimal approach often involves a balanced portfolio of owned and hired equipment, tailored to your project requirements and operational patterns.

By implementing robust maintenance protocols, comprehensive documentation, strong security measures, and appropriate insurance coverage, you can protect your construction plant assets effectively and maintain business continuity even when equipment-related incidents occur. Regular consultation with your insurance broker ensures your coverage evolves with your business needs and industry developments.