Almost every business carries property insurance of some kind, whether it’s for the building the company is housed in (building insurance) or the assets inside it (business personal property insurance). But just because insurance is a necessity doesn’t mean it should be viewed as an expense line item that’s out of your control. (The same holds true for business personal property tax compliance—you have more control over the process than you might think.) The more you understand about business personal property insurance (or BPP insurance), the better equipped you’ll be to find the right coverage, and an insurance partner you can trust.
Austin Landes, a commercial risk advisor at LandesBlosch, knows how easy it is to get lost in the details of property insurance. But he also firmly believes having the right coverage can help a company grow. Below he covers some of the basics surrounding business property insurance, and offers some tips for those of you in search of the right policy and provider.
Business Personal Property Insurance: The Essentials
As noted above, the two standard types of business property insurance are building property and business personal property. Building property is the actual structure attached to the land and can include tenant’s improvements and betterments—improvements made to the space that become part of the building. Business personal property refers to the property generally located inside the building, and covers anything up to 100 feet outside the building that is not part of the permanent structure (non-real property). It also includes things like stock items for retailers or warehouses.
Insurance coverage for these areas is usually separated out. One reason for that is because they are rated differently. Business personal property insurance is generally a bit more expensive than building property insurance because it has different risks. (Tweet this!) When something’s not permanently affixed to the building, the risk of something happening to it is increased. Tools can grow legs and walk away; things get stolen.
Additionally, BPP insurance has extra coverages associated with it, usually applied to moveable items. For example, “property in transit” coverage insures things like computers transported to off-site meetings. And “business personal property of others” coverage insures property that may not belong to you but that you are responsible for. (If an out-of-state business partner brings a laptop during their visit to your building, for instance.)
Another reason building and personal property are separate is because a lot of businesses only need one or the other. Companies located in a leased building need only business personal property insurance; the landlords only need building insurance. If your company both owns and uses the building, such as a company headquarters, for example, you need some combination of both.
Property insurance is usually bundled in with liability insurance—it’s called a package policy. Package policies work for many businesses, but businesses whose operations are inherently more risky (due to the type of equipment they’re operating, for example) may not be able to bundle coverages in a package policy.
No One-Size-Fits-All Policies
It’s difficult to talk about insurance in a general way because almost every business has unique risks and challenges that need to be addressed. Some examples:
- An aircraft manufacturer may have numerous costly CNC machines (for creating high-precision components) that could potentially be damaged by a lightning strike to the building. Equipment breakdown coverage would help protect their machines should such a scenario occur.
- A trucking company wouldn’t worry about property insurance as much as it would auto liability insurance. Some companies have less need for property insurance and a greater need for other types of insurance.
- The contents of the average corporate office building are generally insured similarly. There are some risks associated with being in a building where you don’t know the maintenance schedule; you might also encounter a situation where the sprinkler system goes off, for example, and you weren’t prepared. Many corporations that have multiple locations opt for a “blanket” business personal property policy covering all of them. Such a policy would also cover stock items that travel between buildings, for instance. For this type of policy you simply need to disclose all your locations to your insurance company on an annual basis.
The price of business property insurance is generally based on three things:
- The construction of your building plays a large role in what insurance you can buy and how expensive it is. The stronger the building material, the better rate you’ll be able to get. For instance, frame buildings made of combustible material (typically wood) burn down at a higher rate than those constructed with steel. The Insurance Services Office (ISO) outlines six categories of building construction that many insurers use to help determine rates.
- Your deductible amount has a big impact on your monthly premium. The higher your deductibles are, the lower the cost of insurance will be. Generally, whether or not you decide to choose a higher deductible depends on your tolerance for risk. And there is some opportunity to fine-tune costs here: Because business personal property isn’t necessarily exposed to the elements as much as real property, BPP deductibles can be lower than those for real property in areas with a high risk of tornadoes or hurricanes, for example.
- The location of your building is a huge determining factor in the cost of insurance. Those located closer to the coast typically cost more to insure, for instance; there’s also the possibility that your property might be located near another hazardous building or structure. Many insurance companies use a “tier” system to determine a building’s risk of damage based on its location, which will be different everywhere you go.
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Tips For Choosing A Business Property Insurance Provider
If you’re in the market for a business property insurance provider, Landes has two tips for you:
- When you speak with an insurance company for the first time, present your company in the best light. Have you implemented risk management techniques that help make your property safer? If so, point them out to the insurance broker. Making yourself an attractive prospect to respected, reputable brokers gives you access to more options—and more competitive pricing.
- Look for brokers with a lot of different options rather than one that works for a single carrier. LandesBlosch has contracts with over a hundred carriers, some of whom specialize in something very specific. For instance, one only insures churches and another does strictly law and accounting firms—but both carriers are amazing at what they do. Having a wide variety of choices ensures your company gets exactly the policy it needs at the right price.
Wondering if you need to buy from an insurance provider in your region? Not necessarily. Many brokers are licensed to practice in numerous states. The most important thing is finding an insurance professional you can trust.
Business Property Insurance Resources
Major Insurance Carriers
A Few Reputable Insurance Firms
Grow Your Business With The Right Partners
Landes’ view—and ours—is that businesses grow by focusing their capital on the things they’re good at. In the case of business personal property insurance, that means transferring your risk to the experts so you have the capital to hire new employees, create a new division, or do more research and development. In the case of property tax, that means utilizing your skilled talent for high-value tasks that can actually save your company money—not wasting their time on things like data entry. If you’d like to read more about how our advanced software can take your organization’s property tax team to the next level, visit our website.