This includes the structure and anything permanently attached to the building.
Contents & Equipment
Contents and equipment are called business personal property (BPP) on a business insurance policy. Contents includes anything not a part of the building that is regularly kept on the premises.
Building verses Contents
We are often asked by clients to differentiate whether certain items should be insured as building or contents on their commercial property insurance. Insurance companies understand gray areas exist and, as long as the coverage is on one or the other, they are usually satisfied. For example, we had a seafood processor ask about processing equipment and freezers. The processing equipment, though bolted to the floor, could be removed and generally would not be considered in the value of the building. Thus, it’s value was insured under contents – BPP. The freezers, however, were large walk-in structures and a permanent part of the structure. Thus, the freezers and supporting equipment were insured as building.
Expert Tip: Determine which property insurance valuation method works best for you.
READ MORE >> A Breakdown of Business Contents Insurance
Contents Away from Premises
Coverage for contents usually extends 100 to 1,000 feet from the business premises. So if a business has items that are frequently carried off premises, an inland marine insurance policy is meant to cover such items. Alternatively, some commercial property insurance policies offer a limited amount of coverage for items while away from the premises. Here are some contents our clients frequently carry off-premises.
- Tools and equipment in vehicles.
- Items while at trade shows.
- Equipment to be installed elsewhere. For example, HVAC contractors often carry equipment to be installed at a client’s site.
- Product being shipped (depending upon your shipping terms).
READ MORE >> Protecting Business Belongings While in Transit or Away From Premises
Personal Property of Others
If clients visit a business or drop off items for repair or safekeeping, consider insuring them under personal property of others. Because your business doesn’t own these items they are generally not covered by your commercial property insurance policy. However, if you are responsible for their safekeeping, insuring them in this manner is one means to do so.
Improvements or Betterments
One of our clients moved locations. They rent the new place of business and put $50,000 into renovations to suit their needs. If a fire were to occur, the landlord’s policy would pay the landlord for damages, but our client would still be out their $50,000 investment. By listing $50,000 on their commercial property insurance policy under improvements and betterments, their interests were protected.
Business Income and Extra Expense
Business income and extra expense is another form of commercial property insurance coverage. Statistics show many businesses that lose a primary building never open back up, even if it is insured. Why? They simply cannot afford the downtime until the building is rebuilt and restocked. Many times they lose 6, 12, or even 24 months’ of income and incur large new expenses such as rental of temporary space or storage. Without income, they can’t pay the debt payments on vehicles, buildings, or lost equipment. They also lose key employees since they can’t afford to keep them working in the meantime. Further, if a business’s income depends upon specific equipment with a long lead time to replace such as manufacturing equipment or specialized vehicles, business income can be affected if they are damaged.
Business income and extra expense covers this risk. It is a type of commercial property insurance since it is triggered by loss to a building. It can also be triggered by loss to key equipment or contents. The importance of business income and extra expense insurance can even be greater than insuring the building itself. It can be arranged in different ways, but the basis is simple. It covers:
- lost net income,
- continuing operating expenses (mortgage, key employees, etc.), and
- additional expenses that would not have normally occurred (rental of temporary storage space, cleanup bills, expediting delivery of replacement parts, etc.)
Simply put, building insurance puts your building back up, but business income insurance puts your business back up.
READ MORE >> Business Income Insurance, with Extra Expense