General property insurance concerns any property owner, whether they own a home or business building. It prevents financial loss due to the damage caused to the structure or contents by ensuring that the insurance company will reimburse or repair the property and the belongings inside it.
Moreover, the owner will not suffer cost-wise as they do not have to pay for the reparation out of their pocket and only pay the premium. Damage caused can be anything from natural disasters to theft and manufacturing defects. Still, different insurance companies have varying plans with various coverage, and it is essential to pick a package tailored to your business. There can be many different policies included in property insurance, as well as different valuation methods.
Policies Relating to Property Insurance
As property insurance is a broad term, it can be not easy to include every cover possible. Each property is specific to its use, location and owner and therefore, a range of policies were created to add which would benefit you the most. Furthermore, the more comprehensive the cover on a policy, the more expensive it is. Smaller businesses or properties not prone to as much damage or theft can save policyholders money by not picking these covers and hence can pay a lower premium that is much more suited to them. Following is a list of the most popular property insurance covers:
Commercial property insurance is the most important type of property insurance for business owners. It is specifically designed to cover the exterior of the building and the contents inside it from natural events like fires and lighting and artificial events like theft, vandalism and pipe explosions. In such occurrences, a claim must be filed to the insurance company detailing what has happened and when and be filed by the specific period set in your contract. The team can evaluate the claim and reward you with monetary compensation. The belongings inside the property, like the furniture, appliances, devices and inventory, and the actual property itself, can then be replaced or repaired.
Earthquake insurance is heavily encouraged when a property is located in a disaster-prone area. Specifically, in the UK, this concerns northern England and Wales, where earthquakes of magnitude six have been recorded. Should a severe earthquake occur, the property and its content will be repaired, as well as a temporary building to run the business and ensure things operate as typically as possible until the original property has been fixed?
While most businesses may not necessarily benefit from this cover, it is vital to think about the extent of the damage that can be potentially devastating. Without this type of insurance, the costs of rebuilding a property from scratch and replacing all of the equipment inside it can be detrimental to a company and enough to devastate it, threatening the business’s future financially.
Flood insurance covers losses sustained to a property due to water damage caused by an overflow of water onto dry land. For buildings near the sea, rivers or lakes, it is of utmost importance to protect from the damages caused like cracks in the foundation, destruction to telephone lines, and even damaging appliances; water can also accumulate in the gaps and cause gradual severe long-term disruption. Floor insurance will, in turn, pay for the repair of any structures affected, the drying of the property and, if necessary, the removal of remains. The quote for this insurance is higher if you live closer to water and could be over £100 higher than if you were not close to it.
Fire insurance covers damage sustained to the property directly due to a fire. Not only does this include natural disasters like fire and lighting, but additionally artificial reasons like faulty wiring, water tank malfunctions, and accidental electrical appliance destructions. For example, if there was lightning in the neighbourhood that consequently led to a fire that damaged the roof of your building, the insurer will evaluate the claim and pay for the repair of the structures of the building. In the last year alone, there has been a 40% increase in fire insurance claims and over £1.3 billion paid out to policyholders, proving that obtaining this insurance is an asset that otherwise could lead to business failure without it.
Valuation Methods for Property Insurance
Once you apply for property insurance and acquire it, you must pay a monthly premium based on the severity level of the plan you have picked and the level of risk your property poses. Should disaster strike and you have to file a claim, the money that the insurance company pays out can be decided in one of two ways.
Replacement cost coverage ensures the property based on its replacement cost without detracting the depreciation costs, which are the costs associated with the loss of value of a structure or equipment over the years. Essentially, the money provided is equal to what it would cost to reconstruct the building or replace its contents. This type of coverage is more costly because the payout is higher but worthwhile.
Conversely, actual cash value coverage is the payout that consists of the costs of repairment minus the depreciation costs. It is lower than replacement cost coverage because it considers the property’s value at that moment, fundamentally meaning that older and more used items would be worthless. Thus, the insurance company would pay less money. The payout is equal to what the property and its contents are worth currently instead of how much it would cost to replace the brand new.
Overall, property insurance covers the costs of replacing contents or rebuilding the building. It generally covers damage caused by theft or some types of weather damage. Still, for more protection, it is imperative to be fortified with additional policies depending on the specific needs of your business property. Find out more about property insurance here.
Other useful links about business insurance:
Business Contents Insurance
Business Building Insurance
Employers’ Liability Insurance
Remember to Compare Your Business Costs is here to help your business every step of the way from business advice, or saving you time and money on your business purchases such as: