Why You Need Business Property Insurance

If you run a company, business property insurance is absolutely crucial. Learn all about business property insurance in this article from the editors at InsWeb.

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What Business Property Insurance Covers

Business property insurance covers damage to your building, inventory or equipment caused by a covered disaster. For instance, if a neon sign hanging outside your company's front window is damaged during a hailstorm, you're covered. Business property insurance also covers items such as laptops, furniture and valuable documents.

Types of Business Property Insurance

There are three main kinds of business property insurance:

  • Basic business property insurance, which covers damages from natural disasters such as fire, storms and explosions.
  • Broad business property insurance, covering a wider range of disasters than basic insurance. For instance, riots and other unforeseen events.
  • Special business property insurance, 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

When shopping for business property insurance, you must decide between actual cash value and replacement cost insurance. The difference is depreciation:

  • Actual cash value reimburses the current market value of the damaged item, taking depreciation into account.
  • Replacement cost covers the cost to purchase a brand new item of similar quality, ignoring depreciation.

Replacement cost coverage is a bit pricier, but it may be worth it.

Leasing? You Still Need Business Property Insurance

If you rent or lease your business unit, you may need business property insurance. While the building itself is most likely covered by your landlord's insurance, your inventory, computers and other property specific to your own business are not. That's why business property insurance is so important.

Also, if you operate a home-based business, business-related items are probably not protected under your home insurance policy. So, make sure to purchase business property insurance.

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