Introduction to Property Insurance

What about property insurance? What coverages do I need to have for my start-up business?

Property insurance is essential to operating an effective (and protected) business. You will need property insurance to cover damage or loss to any machinery, equipment, tools or supplies your business uses—an insurance broker or agent can help you determine what you will need to cover.

What is insurance, and how can it help your business? Insurance is a system in which you, the businessperson, pay a premium (sum of money) to insure that your business is protected in case of loss, damage or theft. Insurance has been described as a “system in which winners pay losers.” This is because those people who pay premiums and never have to collect from their insurance pay for those people who pay premiums and do have to collect from their insurance. If you never have to collect from your insurance, consider yourself lucky, and consider your premium an investment to both help other businesspersons and give you financial piece of mind. If you do have to collect from your insurance, you can consider yourself fortunate because your losses are covered by the premiums of yourself and other businesspersons.

For Example:

You own a pizza shop that offers delivery service. You have three delivery cars, and over a long weekend one of your cars is broken into and your radio and dispatch equipment is stolen. If you have the appropriate insurance, your loss will be covered—or paid for—after you have paid a set amount towards the loss yourself, called a deductible. Your deductible will change based upon what type of insurance you have, what sort of risks your business incurs, and the area in which you are located. You might, for instance, pay $250 towards damages incurred to your cars while using them for business. In this you’re your business insurance functions much like private health insurance; you pay a small amount towards the service or product you are receiving, and your insurance company picks up ‘the rest of the tab.’ Your insurance agent or broker should discuss both your premium and deductible with you.

Specifically, property insurance will protect your property in case of theft, damage, fire or other disaster. Having the right coverages to protect your property is essential to your business. Property insurance can both protect your livelihood and provide you with peace of mind. Some businesspersons see insurance as a burdensome expense, but spending the extra money to pay for coverage is well worth not worrying about what will happen to you, your business and your family if your property is stolen or damaged.

You will need to carry additional property insurance even if your business is in-home. Most home owner’s policies cover only minimally or do not cover at all business losses. You will want to insure computers, printers, fax machines and other office equipment that you use specifically for your business with a policy separate from your homeowner’s insurance. Sometimes you can add a “rider” to your homeowner’s policy to cover for business losses, so you will need to discuss your options with your insurance broker or agent.

As with any other type of insurance, you will need to consult an insurance agent or broker to draft and buy your insurance policies. Before you visit an agent or broker, you should take a careful inventory of the machinery, tools, supplies and other property your business owns. Note the market value of each item, and write down any serial numbers on your property. If you keep careful records when you start your business, it will be easier to maintain these records as your business grows and you acquire more property.

You will also want to contact any industry associations that deal with your type of business, or to which you belong. Ask if they publish a guide detailing insurance coverages you should carry. You can also ask what they recommend for property insurance specifically—what premiums and deductibles are ‘regular’ for your industry, and what insurance brokers or agents are known for catering to your specific ‘line of business’?

Visit other businesspersons in your industry. Ask them if they will discuss their insurance coverages with you. Find out what equipment they insure, what premiums and deductibles they pay, and what agents or brokers they recommend. When visiting other businesses or talking to industry organizations, be sure to write down any questions or concerns you have so you can discuss them with your insurance broker or agent. Understanding your insurance policies is just as important as having them!

Find out what “special” types of insurance you need.

For Example:

You are opening your own jewelry store, and have chosen to have glass display windows and cases line the front of your store. You will also have a number of glass display cases inside your store. You will probably want to ask your insurance agent or broker about ‘glass insurance’ to cover damages to your doors, windows and display cases. Depending on the type of business you have, you may also need to purchase additional fire protection or add clauses to your existing fire insurance policy.

Remember that it is important for you, as a business owner, to be informed. Don’t be afraid to ask questions when you meet with an insurance broker or agent. As a start-up businessperson, no one will expect you to know everything about insurance, and it’s better to ask a hundred questions before you buy your policies than to buy policies you do not understand and cannot use effectively. Remember that insurance will be essential to your business, so take your time to review policies and guidelines, and talk to your agent or broker about any concerns you may have.