In today’s blog we will discuss business personal property which involves your equipment, tools, medications and inventory. It is very important that you have a good understanding of the total value of each of the business property items that you have and what it would take to replace them new if they were lost in a fire, storm, theft etc.
One of the biggest mistakes that I find when working with my clients is undervaluing their business property. Make certain that you know the replacement value of all your equipment, tools, medications on hand and inventory and insure to full value. The truth is it is very inexpensive to insure business property to full value and always insure to full replacement cost and not actual cash value. Most insurance agents would advise their clients against insuring business personal property at actual cash value also known as ACV. The reason is you would only get the depreciated value of the equipment, tools and inventory in the event of a loss when you really need the full value to replace those items. You are simply not saving enough money by selecting actual cash value over replacement cost to make it worthwhile.
Another consideration, if you select replacement cost you need to insure your business personal property to full value. I have listened to clients who thought that by selecting replacement cost that it didn’t matter what the value of their business property was because the insurance company would just by them new equipment, tools, medications and inventory. If you underinsure your business property a coinsurance penalty will apply that will reduce the insurance payment on equipment, tools and inventory that were underinsured.
For high valued and specialized equipment you should consider scheduling to the policy. This is a conversation that you should have with your insurance agent to make certain your most expensive equipment is properly insured. It really doesn’t cost much more to schedule your equipment and the benefit over insuring at replacement cost is you select an “agreed value” for the equipment which predetermines the value of the equipment in the event of a loss. We will discuss this type of coverage in a future blog However, for now, go back and check the value of insurance that you have for business personal property and make certain that is representative of the replacement cost value of your equipment, tools, medications and inventory. If there is any question call your agent and discuss your concerns.
In our next blog we are going to discuss building insurance coverage for those of you who own your buildings or are required to insure the building as if you do.