What you need to know about business property insurance
A complete business property insurance plan is one of the smartest investments you can make in your business. It protects the costly, physical assets of your company such as the building, its contents and any outdoor fixtures such as signs and fencing.
Savvy business owners know that a fire or severe windstorm can shut down a business for an extended period of time, often leading to a permanent closure. But with a comprehensive business property insurance plan, you've got support and business income coverage to help you recover quickly.
Understanding the basics
Commercial property insurance plans vary from policy to policy.
Basic property insurance usually covers losses caused by fire, lightning, wind and hail, or acts of vandalism. Additional coverage can be added for earthquakes and breakage of glass.
The essential items to insure in a business property insurance plan include your building, office equipment, inventory and outdoor items on the premises such as fencing, storage sheds, or outdoor signs.
Determining the value of your business property
Commercial property insurance plans pay for losses based on the replacement cost of the item or its actual cash value.
Replacement cost (RC) refers to the amount necessary to repair, replace or rebuild property on the same premises, with comparable materials and quality without deducting any amount for depreciation.
Actual cash value (ACV) is the cost to replace it with new property of similar style and quality, less depreciation.
Typically, the premiums for policies covering property insured on an ACV basis are lower because a lower limit is used due to the deduction for depreciation. This amount might not be enough if you elect to insure the property on a RC basis.
Your insurance agent can work with you to make sure you have your property adequately insured.