Protecting your business against fire loss
Fire in a business’s premises can put any enterprise out of the game for good. The damage associated with fire is always very high and there are many cases when the property gets damaged beyond repair, making it impossible to out the business back on track for a really long time. Only during a single year the losses connected to fires can account $11 billion in the US alone, so you can imagine how much of a peril a fire is for your business regardless of its size.
In most cases standard business property insurance will cover the losses caused by fire. But such policies have a broad range of coverage types involved and are aimed at protecting from a wider range of perils rather providing substantial coverage against a certain risk. If you want to make sure you get enough coverage in case of fire it’s recommended to raise the fire coverage with your initial policy or buy an additional endorsement.
You may question the purpose of such actions, but first you have to understand that a standard business policy doesn’t carry protection against everything you could understand as fire. So it’s better to tailor your policy and adjust it according to your needs and risks rather than having to deal with insurance company rules after the fire has swept out your equipment.
Most business owners (especially if it’s a small business) believe that if they insure their enterprise for a value that is less than the actual value of the whole business, they can save some money on insurance premiums. While being partially right, this assumption is still a bit far from the real picture. If an insurance company finds out in the course of an insurance event that the business will be covered for a smaller value than it actually has then there will be additional penalties imposed, which are much more than what a business would save by cutting down their premiums.
So when determining the amount of coverage your fire insurance should carry make sure to have an independent appraisal by a professional, rather than tax evaluations or your insurance agent’s guess. And insure your business for 100% of its actual value.
When discussing the question of actual cash value or replacement cost benefits you have to understand that most cheap small business insurance as well as costly policies have ACV, which is the value of property minus depreciation. This of course means big trouble to businesses that use costly equipment with a long period of exploitation, because the coverage you will receive won’t be enough to buy something to replace it. In such cases you will need replacement cost coverage that has higher premiums and can be purchased as an endorsement to your basic policy. On the other hand, if you rely on hi-tech equipment or computers that tend to have their replacement cost decline very fast over time then you will need ACV.
Whether you are looking for cheap small business insurance or not, make sure that you are covered properly or the money you will save on premiums will cost you times fold when something bad like fire takes place.