Author: Christina Pomoni
Source: articlesbase.com
Insurance companies offer professional protection through a comprehensive series of insurance products that allows business owners to manage business risk and anticipate business uncertainty. Property insurance insures a business against unexpected loss or damage to the business site and to its contents. Large losses to a business’s assets such as inventory, supplies, equipment, machinery, furniture, computers, money and securities, commercial vehicles, but also trademarks are covered by property insurance. Also, if the location of a business is rented or leased or moved to other physical locations, property insurance is carried by the terms of the lease or contract. Typically, property insurance comes in the form of covering specific perils such as fire, flood and theft that result to large losses of money. This form of policy insures against losses from the single, identified peril. However, property insurance comes also in a broad form that identifies a number of different types of perils and covers against losses from all acknowledged causes in the policy. Multiple-peril insurance policies cover fall of aircraft, volcanic eruption, damages to the building from falling trees, riots, strikes, civil commotions and malicious damages, glass and mirror breakage, food adulteration, short circuit of the building electric panel, third party liability for falling objects, employee confidence coverage for punishable acts, moving, restoring and reallocation expenses, owner and employee accidents and many others. Property insurance is purchased based on several factors. One of them is the location that the business is established. For instance, a business established in Chicago will prefer insurance coverage for snow, ice or sleet damage. A business established in San Francisco will prefer an earthquake insurance policy. Another factor is the business’s income and liability. Generally, property insurance policies are purchased through a Business Owner’s Policy (BOP), which offers property and liability insurance in a broad form property insurance policy. In some cases, BOPs include optional coverage such as business-interruption insurance and extra-expense insurance. Business-interruption insurance provides coverage for taxes, debt payments, salaries, and loss of profit due to interruption of business. Extra-expense insurance applies for relocation costs after a covered damage has occurred. If a business’s site is destroyed because of fire, extra-expense insurance covers for the expenses required so that the business resumes operations through buying or leasing equipment, buying new merchandise and alerting customers about changes that have occurred. In the event that the business is not profitable for a certain period of time due to relocation, the business-interruption insurance applies. Some businesses, however, either because of explicit risks or uncommonly high risk, may not be eligible for a BOP. In that case, single peril policies need to priced and studied. Also, business owners should keep in mind that BOP coverage is typically lower than in a regular property insurance policy. Hence, businesses that require high amounts of coverage should better keep the two policies separate. Property insurance reimburses loss or damage in two ways. Actual Cash Value (ACV): Actual cash value is the value of the property loss. However, there are complications. For instance, if a $200,000 value car has been depreciated over a three-year period, it may have an ACV of $ 135,000 at the time of loss, after deducting depreciation. But, the value of the car will be determined by comparing its condition to similar vehicles. Replacement Value: Replacement value reimburses the actual amount required to replace the loss. For instance, if a new car costs $250,000 to replace, the insurer pays $250,000. Typically, replacement value coverage has high premium.