Any business can succumb to an unexpected disaster, and purchasing adequate property insurance coverage is important for every small business owner. But, in some parts of the country, floods, hurricanes, earthquakes, and other destructive natural phenomena present unique recurring threats. Business owners should carefully consider just what level of coverage is appropriate to offset normal risks, as well as whether supplemental policies could be warranted to address common local dangers.
Property insurance can protect you against the loss of buildings and their contents, as well as the loss of intangible property such as business goodwill, trademarks or information. It can be very difficult to gauge how much coverage is necessary for your business. Before selecting a business insurance policy, you should draft a comprehensive assessment of your projected business needs in the event of a significant loss.
Ask yourself how much compensation you would need in order to keep essential business operations functioning. Is there equipment that would need to be immediately replaced? If you cannot afford to lose customers during the time it would take to rebuild, do you have an alternate location selected? If so, what would it cost to transfer your operations?
You should also weigh the relative benefits of an actual cash value versus a replacement value policy. Depreciation will be factored in for items lost under an actual cash value policy. Replacement value plans, on the other hand, carry higher premiums, but ensure you will receive the full amount needed to buy new, equivalent items.
Property insurance may cover losses arising from a broad variety of sources, or may insure against loss from a specific peril (separate policies for fire, flood, wind damage, etc.).
For policies that protect against individual perils, it is, of course, essential to purchase coverage against the most prominent regional threats. But, even broad form policy holders need to be wary. Oftentimes, general policies have exclusions that reduce coverage under certain circumstances. For instance, exclusions are common for damage resulting from wind, flood or explosions. Usually, additional coverage can be purchased for these “extended perils.”
If you need assistance in selecting coverage for your small business or have any questions about dealing with your insurer, contact an insurance attorney today.