Property Insurance Basics

This type of insurance covers damage and theft to a business's assets, buildings, etc.—such as inventory, machinery and computers, supplies, accounts receivable, money, securities, and even things like trademarks. Some of this insurance is specific to the type of damage, like fire or flood, while others cover combinations of disasters. Most of the basic plans cover theft and fire, but the other types are usually purchased separately. For instance, someone in Louisiana may want flood insurance added to the peroperty policy, while someone in the northeastern areas of the country may want snow or ice damage insurance.

Companies that have good procedures in place to minimize loss—resulting in fewer claims—usually pay lower premiums than other businesses that are higher risk or have porr loss management procedures. For example, a company that has hired a security guard or installed a high-tech alarm system may pay less for theft insurance.

Different Coverage Types

Often property insurance is purchased through the business owner's policy, or BOP. This policy groups together the property and liability insurance; be aware, however, that coverage in a BOP is usually lower than with a regular property insurance policy and many companies that need lots of coverage keep these two separate.

A few of the BOP policies also contain extra expense and interruption of business insurance. These two optional policies help protect companies after the loss or damage occurs. They also cover such things as taxes, debt payments, salaraies, and loss of profit.

Extra expense insurance also covers relocation of a business after a disaster. For instance, if a business experiences a fire and the building is destroyed, the inventory and operations must be moved to another location temporarily. Extra expense insurance will pay the costs of this move, as well as obtaining (though buying or leasing) new equipment, machinery, merchandise, etc. It also covers the costs of alerting customers about changes due to the disaster and relocation. If there is a period of time where the business doesn't make any money due to cleaning up, relocating, restocking inventory that was destroyed, etc., the interruption of business insurance will take care of that loss as well as pay salaries, debts, and taxes during this time.