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Property Insurance

One of the most important forms of insurance for small businesses, property insurance protects companies from losses due to physical damage to buildings (owned or leased) or to equipment.

Property insurance is designed to help you pay for the cost of incidents such as a fire that destroys or damages your office or any company-owned (or leased) building; a burst water pipe that damages your computers or unsold inventory; a storm that destroys your outdoor signs; or similar accidents or events.

Some small business owners may believe property insurance is only effective if they own their facility, but the coverage protects equipment whether you lease your workspace or have a dedicated workspace within a home.

In fact, lenders or landlords may require property insurance before your company is able to borrow funds, or lease real estate. Lenders and landlords want to be sure money would be available to protect their interests if your property experiences a covered loss.

In addition to losses from a fire or natural disaster that damages your equipment, property insurance will also provide coverage if equipment is stolen or vandalized.

Types of property small businesses need to insure often include:

  • Buildings or storage structures
  • Equipment, furniture and supplies (including computers and other IT equipment)
  • Inventory
  • Business records (digital and paper)
  • Vehicles
  • Machinery
  • Other peoples’ property in your care
  • Intangible property (trademarks, patents or goodwill)

Valuation Questions

Business owners exploring property insurance should determine whether a prospective policy offers replacement value (the cost of replacing damaged or stolen property or equipment) or actual cash value (the depreciated cost of an insured asset).

Business owners should also ask if their property coverage would address the costs of upgrading damaged buildings to comply with current code requirements.

Another important question to ask is how the insurance company would value any lost inventory. Some property forms cover lost inventory at your cost to produce it, while others value inventory at its projected sale price.

Since there will likely be a significant difference in value (representing your projected profit) between those two valuations, it's important to understand the insurance carriers expectations before a loss occurs and a claim needs to be filed.

Another important consideration to understand while you're shopping for property insurance is the fact that the coverage won't cover any losses stemming from flood damage. Businesses interested in protecting their property from flood-related property or equipment damage should ask agents about the availability of coverage through the federal government’s National Flood Insurance Program.