There are two broad areas of coverage in a Business Owner’s Policy or BOP; liability and property coverage. Last week I introduced liability coverage and the types of protection found in many BOP packages. This week we’ll outline the property portion of a BOP and what it’s designed to protect.
The property coverage contained within most BOPs can apply to two different areas: business property and business personal property. In addition, there are a number of items many of these commercial insurance policies cover that most people don’t realize is there.
Business Property: Do you own your own building? While most businesses typically lease space, there are some that own the building their business is in. Business property coverage is the coverage that would replace the building if it were lost to a fire, explosion, plane crashing into, and virtually any peril with the exception of a flood (more on that in a future blog). There should be enough coverage to do three things:
- Demolition of the structure
- Debris removal
- Rebuild the building
There are very few instances where a building is destroyed and doesn’t require some level of demolition work. There needs to be enough coverage in the policy to perform the demolition of the entire structure, carting it off to the local dump or landfill (this will require payment of fees), and then building a new facility including blueprints, fencing, foundation, etc. Whether your business operates in an industrial facility, or an upscale retail shopping center, rebuilding costs usually run more than most imagine.
Business Personal Property: Most smaller businesses don’t own the building they run their business in, they rent or lease that space. In these cases, there’s no need for business property coverage, however there is a need to protect everything you moved into your leased space.
Business personal property covers these items including desks, chairs, cubicles, phone sets and systems, office supplies, and the furniture in your lobby, waiting area, or conference room. If you have a break room, it covers any furniture located there, as well as the refrigerator, dishwasher, and utensils. If you are a manufacturing or repair facility, this coverage extends to machinery, tools, lifts, and raw materials on site. For retailers, business personal property covers display cases, racks, and inventory. The amount of coverage needed simply depends on what it would take to replace each and every piece of what’s contained in your office, store, or plant.
There are several other items that business personal property coverage protects including:
- Valuable papers on or off premises
- Accounts receivables on or off premises
- Money and securities on and off premises
- Fire Department service charge
- Fire extinguisher recharge
- Ordinance or law coverage to bring something up to code
- Tenants improvements and betterments (your level of finish out)
- Newly acquired or constructed property
- Property and business personal property at new acquired or constructed facilities
- Tenant’s glass coverage
One of the questions I’m commonly asked when presenting a proposal for a BOP to a prospective client is whether they can remove some or all of these “packaged” items. If it’s contained within, then the answer is no; these items are a part of the insurance company’s standard offering. The limits can be increased if needed but they can’t be lowered or removed.
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