Q: I’m putting together an insurance policy for my first business. There’s a lot to digest, especially for someone who’s just starting out. Can you tell me what business property insurance covers?
Art Rusak is a Farmers Insurance® agent in Chicago, Illinois. He provides details on how business property insurance covers your business.
A: Property insurance has two main components: building coverage and contents coverage. They work together to help cover your physical structures and everything inside them. Most of my customers choose replacement cost coverage on both, which helps cover the cost to rebuild a structure and replace the lost contents with new items. Businesses typically need coverage for equipment, furnishings, inventory and cash on hand.
Your standard policy provides coverage for damage caused by sudden events like fire, wind and falling objects. There are a few exceptions. Coverage for sewer and drain backup requires an endorsement (add-on) to your policy. You need separate policies for floods and earthquakes.
If you’re renting a place, the building itself is typically covered under your landlord’s policy. However, you may need to purchase coverage for any improvements you’ve made to the property, known as tenant betterments. These are built-in features that you add at your own expense to suit your needs, like flooring, sinks and interior walls. While you don’t usually own these items once they’re installed, you do retain an insurable interest in them. Most business property policies automatically cover tenant betterments, but check yours to make sure.
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