Running a successful business involves generating substantial profits and wealth for the owners and shareholders, but it also involves significant risks. Holding tremendous assets means being exposed to potentially tremendous losses, whether from theft, natural disaster, or market downturns. Adequate business insurance coverage is essential for protecting your commercial property. In this article, we'll look at the three types of coverage you need to provide your business a buffer against some of its losses.
Commercial Property Insurance
Commercial property insurance covers the building that houses the business and its operations. The particulars of the coverage varies and you may not need all of it. For example, if your business operates in Oklahoma, tornado coverage is prudent. But if you're located in Alaska, chances are it isn't worth the additional expense.
You many also need to purchase coverage for damage to the building interior, depending on the nature of your business. A performance art space, for instance, that includes acrobatics may suffer damage to the ceiling support beams from the stress put on it by a trapeze. Whatever your business, make sure you tailor your policy to its specific needs.
Many commercial property insurance policies offer coverage for contents in addition to damage to the actual physical structure of the building. You can also purchase this coverage separately.
Contents coverage protects anything inside that is of value to the owners but separate from inventory or stock. This includes furniture, equipment, electronics, and machinery.
While retail businesses rely primarily on their stock to make a profit, the non-stock contents of the building may be crucial to profitability. If a bakery's ovens, mixers, or other equipment breaks down, the business will experience interruptions that can set it back significantly (learn How to Protect Your Business from Coverage Gaps Related to Equipment Breakdowns). In addition to the loss of profit, the equipment replacement cost, especially for industrial or professional grade machinery, can be exorbitant.
Unlike the contents, the stock consists of the products and inventory. Like contents insurance, stock coverage can be purchased individually.
A grocery store, for example, will carry thousands of stock items on the shelves and in storage. If a wildfire swept though the area and damages the grocery store and its stocks, the loss could be devastating, even if the contents are covered.
As with other kinds of business insurance, you will need to assess the nature of your company and the risks you are most exposed to. This means, first, evaluating just how valuable your stock is to your operation. If your business is primarily service based, you may well decide to take a hit on your stock if any losses occur rater than spend money on stock insurance premiums. Second, it also means assessing the kinds of risks your stock is exposed to. You may, for instance, opt for theft coverage but do without flood coverage, depending on your geographical location.
Business insurance is a way to protect the significant investment you made when you first started your company. Although it is not legally required unless you're an employer, it is common practice to at least purchase a policy with enough coverage for your assets.
Besides these three basic types of business insurance, whether you are an employer or not, you may want, need, or be required to purchase other types of commercial coverage. Carefully asses your risks so you purchase the necessary coverage and enjoy the financial protection and peace of mind business insurance affords you.