Why You Need Business Property Insurance

No business owner can predict the future, which is why a business property insurance policy is critical. It's also why there are more commercial insurance policies written annually than personal policies.

What Business Property Insurance Covers

Business property insurance covers your business in case of unforeseen damage or loss to your building, inventory or equipment. That means even if the neon sign hanging out in front of your store shorts out in a storm, you're covered. Business property insurance coverage also extends to items such as laptops, furniture and valuable documents.

Types of Business Property Insurance

There are three main kinds of business property insurance according to the National Association of Insurance Commissioners:

• Basic business property insurance covers damages from natural disasters such as fire, storms and explosions.
• Broad business property insurance covers the Basic damages, plus other unforeseen events such as a riot that leaves your store in shambles.
• Special business property insurance is the most comprehensive form of business property insurance. It covers Basic and Broad damages, plus all direct physical loss that is included in your policy description.

Actual Cash Value vs. Replacement Cost Business Property Insurance

In addition to the plan level, you also have to decide between actual cash value and replacement cost insurance. The difference is depreciation. In short, an actual cash value business property insurance policy will give you a used laptop of the same age and current market value as the one you lost, while a replacement cost policy will give you the cash to buy a new laptop that is similar to the one you lost, ignoring depreciation.

Business Property Insurance for Business Owners Who Lease

If you rent your business unit, don't assume your landlord is responsible for losses to your property. While the building itself is most likely covered, your inventory, computers and other property specific to your own business are not. That new executive desk you just bought could be a distant memory if there is a fire or other loss and you never purchased your own business property insurance to cover the item.

In the case of a lease or rental, you will usually only need business property insurance to cover the property and improvements you paid for. Of course, your landlord may sue if the damage is caused by you or one of your employees — in that situation, you'll need a comprehensive business property insurance plan.

Finally, if you operate a home business, it is probably not protected under your home insurance policy, so make sure to get business property insurance.

Business Property Insurance Seasonal Variations

Let's say you run a seasonal operation, such as a Christmas tree business. A week before Christmas you come to work and all of your trees have been uprooted. Though that thief wouldn't be very hard to catch, you will experience a higher loss in that particular season. Christmas trees are worth a lot more at Christmas than they are on St. Patrick's Day. So most business property insurance policies account for seasonal variations and will provide for an automatic percentage increase in your coverage limits during the busy season.

As a business owner, you know the value of protecting your assets. Be sure to purchase a business property insurance policy that will safeguard all aspects of your investment. Find a great business property insurance policy by comparing business insurance quotes at InsWeb.