How to Judge if Your Business Property is Over-Insured or Under-Insured

If you own or manage a business property, you face insurance quandaries. What kind of coverage does the property need? How much coverage is right? Can I think about this later? It’s a perplexing and widely shared experience: nine of ten small businesses aren’t confident they are adequately insured. 

“Lots of business priorities seem more immediately urgent than insurance, so it’s easy to put off,” says Hannah Jennings, General Manager, Paul Davis Restoration of Fairfield and Westchester Counties. “But so often commercial clients discover too late that they are underinsured. It’s a dreadful discovery when a dangerous storm looms or a fire breaks out.”

Common insurance types that many companies choose include the following (though many others may be indicated for your particular property):

• Commercial Property: Protects physical assets like structures, business equipment and inventory. 
• Business Income: Replaces lost income if your property closes temporarily or can’t produce income. Also referred to as “Business Interruption”
• Flood and Earthquake: Extends coverage for events that are typically excluded from traditional property insurance policies.
• Bailee’s Coverage (or Bailee’s Customers Coverage): This applies when your business temporarily possesses customers’ property for service, repair, storage, or processing
• Ordinance and Law: Covers expenses for bringing buildings into code compliance after covered property losses or damages.
• Equipment Breakdown: Covers repair and replacement costs for equipment that is damaged due to issues during business operations.
• Inland Marine: Protects products, materials and equipment that are transported over land, i.e., via non-marine transportation such as trucking and rail.

Clearly, this insurance landscape is vast and nuanced, so it’s helpful to discuss choices and changes with a trusted insurance professional. Ask these questions to avoid over- or under-insuring your property:

• Do I have duplicate coverage?
• Do I have the coverage required by my municipality and regulatory bodies?
• Does my coverage account for asset and property appreciation or depreciation?
• Has my risk exposure changed and how much risk should we assume?
• Has my business expanded, contracted, diversified or changed its business model? 
• How can insurance premiums better fit our budget? What are my deductible options?

“Finally, shop around for coverage and inquire about typical BOPs, or business owner policies, that may bundle options at better prices,” Jennings urges. “Prices vary from carrier to carrier, as all of us know from shopping for homeowners, health and auto insurance.”