“What do you mean it’s not covered?”
“What did I buy all this insurance for?”
“Where’s my agent?”
“Where’s my lawyer?”
Have you ever had this sort of sequence of questions after a denied property claim?
If so, this blog’s for you.
But first, I’ll explain what we’re talking about when we talk about insuring property.
What is “Property”?
Property is physical tangible items that you own, lease from others, and/or have care custody and/or control over that you use in your business.
I’m talking about:
- Buildings and structures
- Business personal property
- Tenants improvements and betterments
Property Insurance is therefore insurance on those described physical tangible items that pays to repair or replace those items when a covered peril causes physical damage or loss to them.
There are lots of types of property insurance policies out there. Some of them are good, some are bad, but all policies – even the best policies you could possibly buy – have exclusions. Quite a bit of them.
And that’s what we’re talking about here when we talk about the five essential coverages that most business owners forget. Ways to fill in some of those gaps – or buy back coverages – that are created by exclusions.
And I’m not going to talk about flood and earthquake because everyone knows those two things aren’t covered. Am I right or am I right? I’m right, right? Everyone knows that flood and earthquake aren’t covered on their standard property policy, right? No, we’re looking at the coverages that are less obvious, a little more discreet, and often a big surprise to find out you have no coverage after you file a claim.
So let’s get into it!
ONE – Ordinance and Law
What Is It?
This is a three part coverage that pays for damages when the government is the instigator of the loss.
Coverage A: Pays to replace your building if the cause of loss is due to the law or government action.
Coverage B: Pays additional costs incurred to if law requires you to demolish any part of your building after a covered loss.
Coverage C: Pays for additional costs incurred to bring your building up to code following a covered loss.
Simple Example
After a fire burns down a portion of your building, local code requires you to demolish the remaining undamaged portion and rebuild the entire building with new upgrades, like fire sprinklers, an elevator, handicap ramps, etc.
Ordinance and Law will pay to:
- Demolish the undamaged portion of the building (the part the city is making you knock down)
- Rebuild the newly demolished part
- Update the entire building up to code – adding the fire sprinklers, elevator, ramps, etc.
TWO – Equipment Breakdown
What Is It?
This is a coverage that pays for damage to your building and business personal property caused by an accident or malfunction of mechanical, electrical, or production equipment in your building.
Simple Example
Electrical arcing occurs in your air conditioning unit, causing an electrical surge through the building which damages those portions of the building, including the air conditioning unit itself. This coverage pays to replace the damaged building and equipment.
THREE – Backup of Sewer and Drain
What Is It?
This is only something to consider if your building has plumbing! This coverage pays for damage caused by backup of sewers and drains originating offsite.
Simple Example
The city’s sewage system clogs, backs up, and sends waste matter the wrong way through your pipes and into your building. This coverage pays for the damage it causes.
FOUR – Employee Dishonesty / Crime
What Is It?
This is a coverage that primarily pays for losses to covered property resulting from dishonest criminal acts by your employees, as well as pays for loss to categories of property not coverage, such as accounts, bills, and currencies.
Simple Example
Your employee steals shoes and t-shirts that you are selling in your store, cash out of your register, and then copper wiring out of your air conditioning units on the way out. This coverage pays to replace those items.
FIVE – Spoilage
What Is It?
This is something to consider only if you have perishable stock! This coverage primarily pays for spoilage damage to your perishable stock resulting from mechanical breakdown, contamination by refrigerant, or power outage.
Simple Example
Your utility service provider severs a line off-site and it shuts the power off at your premise causing your perishable business personal property to spoil. This coverage pays to replace the spoiled stock.
And that’s all five. But wait, as a thank you for sticking with this blog this far along, here’s one more.
BONUS – Earthquake Sprinkler Leakage
What Is It?
This is only something to consider if your building has interior fire sprinklers! This coverage pays for damage caused by leakage of automatic fire suppression system resulting from an earthquake.
Simple Example
An earthquake occurs causing your interior fire sprinklers to leak water damaging your business personal property. This coverage pays to replace your business personal property.
Conclusion
So there you have it: five often overlooked coverages that most business owners forget (plus bonus). Were you surprised to know that these things are excluded on the vast majority of policies? Most people are! If you’re curious about whether you have any of these coverages, or if you’re missing any of them, if you’re looking for advice, or if you would like a quote on your property insurance, give us a call or connect with us.
Our process is simple:
- Set an appointment. Just click HERE
- Have a conversation. We’ll learn about you and your business and your commercial property in order to determine how we can help – or offer you a quote, if you choose.
- We’ll provide a solution. Once we understand your needs and your situation, and/or we’ve received the best quote that our markets have to offer, we’ll reach out to you to discuss your options.
