A client recently asked regarding business contents insurance cost projections for a new venture. “I’m considering opening a home improvement box store. It will be like a Home Depot but pick-up only. It will require special gear, so I’m looking for how to best insure the equipment, inventory, and other contents of the building.” On the surface, her inquiry sounded novel. But upon a closer examination, it was the age-old question every business owner asks: “What’s the best way to insure all my business ‘stuff’?”
Business contents insurance enables companies to replace or repair their belongings if damaged. In this article we will consider contents that remain at or near the business location. For items that frequently move about, reference Protecting Business Belongings While in Transit or Away From Premises.
Contents versus Building
First, we should clarify what is considered business contents versus part of a building. Contents are those items that are not permanently attached to a building. A good example is a freezer. A standard freezer in the employee breakroom would be considered contents, but a commercial walk-in freezer would be part of the building. Gray areas exist, but the good news is that we don’t need to fret over them; when in doubt, check that all value is insured on the policy one place or the other, and be consistent. If you decide a certain piece of processing equipment is contents and insure it as such, cover similar equipment in the same manner. When a claim arises, insurance companies are mainly concerned with ensuring 1) the value of the items lost is included in the policy coverage limits (contents and/or building), and 2) that those coverage limits are adequate. For further questions, ask your Bankers Insurance agent.
Business assets may be broken down into categories such as furniture, raw materials, work in process, finished goods, stock, inventory, processing equipment, or mobile equipment. However, business contents insurance is rarely listed on the policy in such detail. The value for these items is summarized into either 1) contents, or 2) mobile equipment. If the business routinely houses contents belonging to others, 3) property of others may be specified.
Contents versus Mobile Equipment
Business contents insurance includes items normally housed inside business buildings or elsewhere at the business location. Furniture, computer equipment, and inventory are commonly insured as contents, but raw materials or stock stored in the open can also be included. If the item remains at a business location, insuring its value as contents is usually a good choice. On the other hand, mobile equipment can include items such as forklifts, backhoes, skid steers, and construction equipment – things that routinely travel off premises but are not licensed by the DMV.
Rates for business contents insurance are similar to those applied to the building in which the contents are located because all are exposed to the same risks. However, since mobile equipment routinely moves off site and is exposed to increased hazards of weather, theft, and transport, these items generally cost more to insure. Contents are not insured while off site (again, reference Protecting Business Belongings While in Transit or Away From Premises for exceptions) whereas mobile equipment is. If a business only owns a few items of mobile equipment which remain on the business premises, owners can elect to cover these items as contents in an effort to simplify insurance policies. That said, coverage for mobile equipment includes protection from flood damage, plus several other nuances exist, so ask your Bankers Insurance agent regarding your specific situation.
How To Insure Business Contents
The best way to figure out how much coverage is needed is to create an inventory of your business belongings. An inventory list plus depreciation schedule from your accounting system may be a good place to start, but often is not all-inclusive. Walk around and take note.
Coverage Limits and Deductibles
Now that you know what needs coverage, how much is necessary? Reference Business Property Insurance Valuation Options to determine whether you wish to cover the items according to their replacement cost (most policies) or their actual cash value. Total the value of all items and ensure that figure is reflected in the coverage limits on your insurance policy. Next, choose a deductible that reflects your risk tolerance. Some businesses may desire a lower $1,000 deductible, whereas others may want to save on insurance premiums and shoulder some of the risk themselves by choosing higher deductibles. Mid-sized and large businesses sometimes choose deductibles of $50,000, $100,000, or higher.
Business contents coverage is included on property insurance policies. These policies vary, so please contact us with any questions. We can explain your insurance policies in clear terms. Not a client of ours? Let us earn your business! Each client is assigned a personal agent in our office, given their email address, and provided a phone number that rings right on their desk.