Property Insurance for Small Business
While business property insurance is not legally mandatory, under no circumstances should a business be uninsured for its property, equipment, and inventory, as well as against its potential liabilities, in this litigious society.
What is it?
Property insurance protects your business against physical damage to, or loss of, your assets. Assets, broadly defined, include the area in which your business operates and the property housed there. In the case of catastrophes like fire, explosion, theft, or vandalism, property insurance helps cover your costs - whether it's to repair damaged property or replace what you've lost.
Purchase Options:
Property insurance can be purchased on the basis of the property's actual value (the replacement cost minus depreciation – known as “ACV” policies), its replacement value (the cost of replacing an item without deducting for depreciation), or on an agreed-upon amount (commonly used for art objects and other unique items).
Pricing Premiums:
The primary factors in setting property insurance premiums include the type of building structure, the presence or absence of protective safety measures, and the proximity of your property to other high-risk areas. This basic rate is then further adjusted at the discretion of the insurer, who credits or debits based on claims history or specific loss-control measures.
Typically the premiums for ACV policies tend to be lower, as they usually pay out less, but the reimbursement could be inadequate if you actually need to replace items. Therefore, most brokers will tell you that you are better off with replacement-cost insurance, unless your industry's used equipment is easily obtained at its physically depreciated value.
Property to Insure:
This list can serve as a general guideline when thinking about what type of property to insure:
- Buildings and other structures, leased or owned
- Furniture, equipment, and supplies
- Leased equipment
- Inventory
- Money and securities
- Records of accounts receivable
- Improvements and betterments you made to the premises
- Machinery
- Boilers
- Data processing equipment and media, including computers
- Valuable papers, books, and documents
- Mobile property, such as automobiles, trucks, and construction equipment
- Satellite dishes
- Signs, fences, and other outdoor property not attached to a building
- Intangible property (goodwill, trademarks, etc.)
You should take a complete inventory of all your business property, determine its value, and decide what's worth insuring.
Exclusions
Be sure to carefully read over any policy and make a special note of any exclusions, such as flood damage for example. Depending on your individual business and its location, you might want to purchase coverage for these exclusions.
Related Topics:
Disaster Recovery Plan
Remote Backup
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