If you own a business, you know exactly how much time and energy and money it takes to get a new company running and keep it growing.
But one unforeseen event can take all that hard work away in the blink of an eye if you don’t take steps to make sure your business is protected.
If you’re looking into or wondering if you need business insurance coverage, keep reading to learn about what coverages your business needs.
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What Is Business Property Insurance Coverage?
Business property insurance is the coverage the property your business owns and uses receives in the event of an accident or disaster. In other words, it covers the financial costs such issues incur to business with as little interruption to the general operation of the business as possible.
Because different industries have different inherent risks and hazards, business insurance can be tailored to fit different needs. Some common reasons an insurance claim might be filed include:
- Loss of a facility from a disaster like a fire
- Water damage from accidentally triggering a sprinkler system
- Loss of equipment due to theft
Property insurance is generally just one part of a larger insurance package for businesses, typically called a BOP, or business owner policy.
Property Insurance Policies
Within a BOP, property insurance is one of three main components, along with liability and business interruption insurance.
The property insurance portion of a BOP includes coverage for the following.
Buildings or Structures
All buildings or structures listed in the first pages of your policy, or the Declarations, are covered. This includes permanently installed buildings, temporary outbuildings or building in progress, outdoor fixtures, and items or equipment used to maintain the buildings.
When choosing insurance, you can choose to insure your buildings at their actual cash value, or what they are worth, or their replacement cost, which is what it would cost to actually replace them.
If you choose replacement cost, your policy’s limit would increase each year to keep up with rising building costs. You’ll want to discuss with your agent which is the correct option for your business.
Building Contents
Everything inside the building, with a few exceptions, is also covered. This includes all property that is on or near the business that is used for or in the business. For instance, all machinery, computers, equipment, raw materials or inventory kept on hand and anything related to business operation.
If you have leased equipment or property on site that you are required by law to insure, that will also be covered.
Property of Others in Your Care
If you have a business that requires you to care for the property of others, such as a repair business, that will also be covered in the event of an accident.
This coverage also extends to any property you may have borrowed or stored on your premises that is being used for business purposes.
If you’re looking for more comprehensive information on a property insurance policy, check out this property insurance guide.
Do You Need Business Property Insurance?
If you can answer yes to any of the following, your business needs property insurance.
- You own or rent a building to operate your business.
- Your business owns physical property in the form of equipment, office supplies, or machinery.
- You keep inventory or raw materials to create products on hand.
- You store products for sale.
- You rent equipment or space from others that you are legally required to insure.
- You own a facility or equipment that you rent to others.
Covered Causes of Loss in a Typical BOP
One kind of insurance provides blanket coverages for any event that may happen except specific named hazards, like a tsunami, for instance. Because this is technically broader coverage, the premiums for this insurance will be higher.
The second kind of insurance provides coverage for specific named events only, meaning you’re covered only for those named events and nothing else.
The most common named forms of causes of loss in most BOPs are:
- Fire
- Lightning
- Explosions
- Wind and hail
- Smoke from accidental fires
- Aircraft and vehicles
- Riots
- Vandalism
- Automatic sprinkler leaks
- Sinkholes
- Building collapse
- Volcanic eruptions
- Water and other liquid damage
What Isn’t Covered
You’ll want to double-check your policy to make sure you understand exactly what is and isn’t covered, but here are the most usual non-covered events.
- Regular wear and tear of property
- Some catastrophic events, like earthquakes
- Nuclear events or acts of war
- Employee dishonesty and embezzlement
Some types of property are typically excluded as well.
- Outdoor signs not attached to buildings
- Bullion, money, securities, and shares
- Land, water, crops, trees, shrubs, and plants
- Outdoor fences
- Vehicles including air and watercraft
All of these events and types of properties might be able to receive coverage with the addition of insurance “riders”, or special supplemental insurance add-ons that are included for an additional fee.
How Much Does Property Insurance Cost and Is It Tax Deductible?
The cost of insurance will depend largely on the location, size, and income of the business, and if you choose bundled or individual policies.
A BOP can save your money – the bundled coverages are cheaper than purchasing individual policies. If you have a lot of special coverages like those listed above, you’ll be looking at higher monthly premiums for each additional rider.
The average business insurance policy runs about $1,281 annually.
And yes, business insurance is considered a business expense, and is, therefore, tax-deductible!
Get Your Business Property Insurance Today!
Now that you know what business property insurance coverage is, and why you need it, go find yourself a BOP today and get your business covered!
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