Business Property Insurance

Insuring business property is a tricky task that always merits professional input. Plan to spend some quality time with your insurance agent devising a list of your business property risks and a strategy for covering them adequately. Here are some categories to consider:

• Property insurance can make you whole in the event you sustain a loss to any business property, be it a truck, store fixtures, inventory, raw materials, and so on. If possible, you'll want to get "all risk" forms of insurance in order to secure the broadest coverage available. Otherwise, you'll have to insure each class of property with a separate policy. "All risk" policies generally cover all perils not explicitly excluded. (Also see our discussion of Personal Property Coverage.)
• Auto physical damage policies, whether for personal or business vehicles, can cover collision damage as well as assorted perils from fire, wind, hail, vandalism, and malicious mischief, as long as you take out a "comprehensive" or extended coverage policy. Collision insurance can be carried with a high deductible, thus reducing premium costs significantly.
• Cargo coverage can also be secured to cover the cost of any losses to inventory or goods on board your company truck.
• Crime insurance is designed to cover specific risks you may have in your business. These can range from burglary coverage for your safes to off-premises robbery of your bookkeeper en route to make a bank deposit. Coverage can be obtained to protect you against embezzlement, employee theft, and inventory losses resulting from criminal activity as well as a romantically titled risk known as "mysterious disappearance." Crime insurance is generally quite expensive.
• Fire and extended coverage: Basic fire policies are standardized in the US. They cover fire and lightning, but exclude theft. Extended coverage is almost always purchased with a standard fire policy. Comprehensive "all risk" extended coverage is what you'll want for your business. These policies cover hail, windstorm, and vandalism as well as fire. Policies can be purchased that will also protect your accounts receivable records, computer files, currency, securities, and valuable papers. Flood losses, however, must be insured separately. Flood coverage, naturally, varies depending on your geographic location and hence cannot be standardized nationally.
• Inland marine is a rather misleading name for a type of coverage used to protect high risk, mobile items of stated value that are not covered by your plain-vanilla commercial property policies. Inland marine coverage can protect valuable tools, for example, if you're a mechanic or tradesman, artwork if you operate a gallery, or a jeweler's inventory.

Did You Know? The derivation of the name for inland marine coverage comes from Lloyd's of London. Many, many years ago, Lloyd's carried what was known as marine insurance on all the cargo of incoming and outgoing ships for British ports. The story goes that a couple of the principals of the firm, while sitting in a pub, were discussing how they could continue to insure the cargoes after they reached port and were shipped over land to their ultimate destinations, thus doubling their business. One principal noted that "marine" insurance wouldn't quite do to describe this new wrinkle, whereupon his fellow principal suggested "inland marine" as being an acceptable mutation. And, of course, it stuck.

But the important thing to remember about inland marine coverage is that it covers property in transit or mobile property, whereas standard property insurance normally covers items located within 100 feet of a specific physical address.

Your insurance professional can also meet individual needs with rent insurance, fire sprinkler coverage, boiler, machinery, and key-person policies. Always deal with a stable carrier, and should you sustain a loss, document it thoroughly and report it promptly.

Once you have covered these basics, you'll be able to avoid the most common pitfalls. You're still not immune to setbacks, but you'll be well on your way to having a successful business.

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