What should I look for in property insurance for my business?
Commercial property insurance offers different options for coverage with a number of variables. It doesn’t matter whether you are insuring the building, the business property or any combinations, a variety of options are available to pick from. It is important to understand how the property is valued at the time of a loss, and whether replacement cost or actual cash value was chosen. This question is really what needs to be answered first, before a claim, to help determine what works for your business.
Replacement cost is coverage which will pay with “Like kind or quality” up to the policy limit in place and subject to any deductible. Guaranteed replacement isn’t normally found in commercial insurance like it is in homeowners insurance, but if you are fortunate enough to have that coverage, the loss will be covered to replace the building to its original state, even if it means exceeding the policy limit.
Remember, it’s like kind or quality. If you had carpeting, the policy isn’t going to replace with mahogany or bamboo flooring or imported Italian tile. It’s always a good idea to photograph or digitally record your space and hold those off site. When filing a claim, it is much easier to determine “Like kind or quality” from visual records.
Actual cash value is the cost of repair or replacing the property less depreciation. Depreciation is the loss in value of the property due to time and wear and tear. Again, this coverage is subject to limits and deductible.
Choosing which type of coverage that is right for your business is difficult. Normally, Actual Cash Value is less expensive than Replacement Cost. The difference in premium can be substantial. Sit down with your licensed insurance professional and determine scenarios and risk.
Meet with a commercial contractor and ask for an estimate for rebuilding. Make sure you review this policy at least annually with your agent and update them during the year of any changes or additions to your location.