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Understanding the Property Component of the Business Owner's Policy

A Business Owner's Policy includes Commercial Property Insurance, which covers the property your business owns, including...

  • Equipment.
  • Computers.
  • Tools.
  • Supplies.
  • Inventory.
  • Land.
  • Buildings.

Insurance policies can cover this property when it is damaged, destroyed, or lost. Typically, Property Insurance covers fires, theft, vandalism, and some damage caused by weather. For example, minor storms (think wind and hail damage) are usually covered, but major weather events (including the kind that the National Weather Service assigns a name) are often not covered.

If your property is damaged by a covered event, your insurer sends you a check for the money you need to replace what you've lost.

Is Commercial Property Insurance Important for Small Businesses?

Yes, because Commercial Property Insurance protects the investments you make in your business. Your commercial property is sometimes called business "capital" because it is the property that allows your business to function. A business needs its storefront, equipment, and other property in order to make money. Protecting these things is a vital way to ensure you are able to stay in business if you're struck by a bit of bad luck.

What Is Business Interruption Coverage and Does My Company Need It?

Business Interruption Insurance is a Property Insurance coverage that pays for the income you lose after a covered event forces your business to shut down temporarily.

Say you run a restaurant. While sautéing onions one day, a cook leans too close to the range and his apron catches fire. He throws off the apron, but the fire spreads and soon the kitchen is in flames. The building's sprinklers put out the fire, but not before major damage is done. You must repair the kitchen, repaint the dining area, and replace the cash registers and electronics ruined by the sprinklers. The repairs will take over a month, and you'll have to pass inspection before you can reopen.

In the lifespan of a restaurant (or any business), a month is an eternity. You still have bills to pay, but won't have any source of income. Fortunately, Business Interruption coverage covers your lost income. You are able to pay your employees and make ends meet even while your business is out of commission.>

How Much Property Insurance Do I Need in My Business Owner's Policy?

The amount of coverage you need depends on how much property you want to insure and the value you want to insure it at. BOP Property coverage starts at $5,000 worth of protection and goes up from there.

You need to choose an amount that represents the money you'd need to get your business back on its feet if its property is lost or damaged.

There are two options for how you can value your property:

  • Actual-cash-value policies. These policies only cover the depreciated value of your commercial property. For example, old computers are insured for the value they have if you sold them today — not what you paid for them.
  • Replacement-value policies. These policies cover the cost to replace property with a new equivalent. For example, old computers are insured to be replaced with comparable new ones. This policy is important when covering buildings. An office space might be worth $200,000, but if it were severely damaged, it might take $300,000 to repair it. Clean-up and repair costs can easily exceed the total value of the property. In this case, a replacement value policy covers the repairs even when they cost more than the building itself.

The choice between these two options hinges on your budget and the kind of property you have. Actual cash-value policies offer less coverage and cost less. Replacement-value policies offer more coverage and cost a bit more.

Free Quotes on Business Owner's Policies and Commercial Property Insurance

For a free Commercial Property Insurance quote, submit our online insurance application for small businesses. Our agents work with you to find coverage that protects the investments you've made in your business.

Business Owner's Policy: Further Reading