When it comes to insurance for your physical property, you want to make sure to get a policy written on an all-risk basis rather than on a named-peril basis. While the latter only covers the specific perils named in the policy, an all-risk policy will cover you for virtually anything (except for a few specific enumerated exclusions). The all-risk policy will allow you to:
- Eliminate duplication and overlap;
- Avoid gaps in trying to cover your liabilities through a number of specialized policies;
- Encourage quicker settlements by working with one agent and one attorney;
- Reduce the expense of having many different policies.
If your local or regional location is inclined toward a specific calamity, you may consider additional insurance or pay an additional premium to insure against fire, flood, earthquake, nuclear risks (if you're near a nuclear plant), hail, windstorm, vandalism, or crime.
An experienced agent or broker may roll many overages into a business owner's policy (BOP)--a ready-made program for small businesses--or a special multiple-peril plan.
Replacement cost insurance will replace your property at current prices, regardless of what you paid for it, and thus protect you against inflation. However, there's usually a provision that your total replacements can't exceed the policy cap. For example, if you have a 40,000-square-foot facility that would cost $40 per square foot to replace, the total replacement cost ($1.6 million) may exceed your $1 million policy limit. To protect yourself, buy replacement insurance with an insurance guard, which adjusts the cap on the policy to allow for inflation. If this isn't possible, simply review your policy limits from time to time to make sure you have adequate coverage.
With coinsurance, the owners of a building can actually share the potential loss with the insurance company if they're willing to share the premium cost. These terms are crucial if you are on either end of a leasing agreement. A common percentage of market value of buildings used in coinsurance is 80 percent, with the owner bearing the cost of the other 20 percent in the event of a complete loss.
See also "Insurance."