Covering Your Business Personal Property
Any business owner seriously concerned about protecting business assets should carefully consider how those assets should be insured. Determining how much your business personal property is worth, carrying the right amount of insurance on your commercial property policy and looking at different levels of coverage are all important.
What to Insure?
Business personal property, as covered on a commercial property insurance policy, includes property situated inside or outside at locations used for your business operations. It doesn’t include the building if you own it or are responsible for insuring it, but it may include some items of real property if you rent or lease the building. Here are some specific items to consider when determining what to insure as business personal property:
- Furniture, fixtures, machinery and equipment, including permanently installed items if you don’t own the building;
- Stock, including merchandise held for sale or in storage, plus raw materials, goods-in-process, finished goods, and packing and shipping supplies;
- Alterations, installations or additions made a part of a building or structure you occupy but don’t own, if you acquired or made them at your expense but can’t legally remove; and
- Personal property of others that is in your care, custody or control.
Some items of personal property are specifically not covered on the typical commercial property policy, including most types of motor vehicles, money and electronic data. Other insurance policies are designed to cover these and other special items of personal property.
How Much Insurance?
You don’t want to purchase too much insurance, but it would be even worse to purchase an insufficient amount of insurance that wouldn’t help you restore your business operations as quickly as possible.
You have a choice of insuring your personal property for what it would take to replace it with new items, or a lesser amount based on what the policy calls “actual cash value.” The latter is NOT the depreciated value of the property carried on your books for tax purposes. It is usually much more, based primarily on the value of acquiring similar property of approximately the same age and condition as the damaged property.
Your policy may contain what is called a coinsurance provision. Coinsurance is essentially an agreement between you and the insurance company. In exchange for your agreement to insure the property for at least a specified percentage of its actual value, the company agrees to issue the policy for a lower premium than it would charge
for a policy without a coinsurance provision. After a loss – even a small loss – if the amount of insurance on your property isn’t sufficient to satisfy your part of the agreement, then the insurance company can reduce the amount it would normally pay.
Remember: It is your responsibility to establish the value of your property and select the amount of insurance for your policy. Your agent can help with that decision and explain what you can do to avoid underinsurance or a coinsurance penalty.
What Kind of Insurance?
You have clear choices about what causes of loss will be covered on your commercial property policy, ranging from “basic” to “broad” to “special,” and the cost goes up depending on which form you choose.
The “basic” and “broad” forms cover specific types of losses, such as fire, explosion, windstorm, hail and vandalism. These forms do not cover theft. The “special” form covers all direct causes of loss except those that are specifically excluded. This form covers theft and some types of water damage.
All of these forms exclude flood and earth movement, as well as other causes of loss that are either uninsurable or better covered on other forms.
Plenty of Options
You have a number of options to choose from when considering how to insure your business personal property. Contact Anco Insurance today to quote a range of options so you can determine the coverage you need for a price you can afford.
This article was prepared and made available to your agent by the Independent Insurance Agents of Texas, which is solely responsible for its content. Please read your insurance policy. If there is any conflict between the information in this article and the actual terms and conditions of your policy, the terms and conditions of your policy will apply. The Independent Insurance Agents of Texas is a non-profit association of more than 1,500 insurance agencies in Texas, dedicated to helping its members succeed, in part by providing technical resources that explain insurance policies sold to their customers.
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