When you buy your business owners policy (BOP), you’ll get a foundation of insurance essential for your small business. One of the primary lines of coverage included in most BOPs is property insurance. It will provide considerable protection for your structure and the possessions inside. The insured items can include many different possessions including different furnishings. However, the policy might restrict your ability to get full compensation for your losses. Consider some of the unique formulas your policy might use to pay you for contents.
BOP Contents Insurance
Contents insurance within your BOP will apply to many items within your business. These might include:
The purpose of your contents coverage is to help you repair or replace damaged items in the event of unexpected or unavoidable accidents on the property. For example, suppose that you have a fire in the business. It could damage a significant number of the materials inside. You could not have predicted this loss, so your BOP will likely compensate you for the damage. However, certain restrictions might apply on how much the policy will pay you.
Coverage Limits & Exclusions
When enrolling in your BOP, you will choose a coverage limit for your contents protection. The limit you choose will be the maximum amount that your policy will pay you for a given claim. For example, if you have a limit of $25,000 in contents coverage, then you will receive at most $25,000 for all of the losses that you will sustain per claim. However, further limits will likely apply.
For example, some policies place sub limits on what they will pay for certain items. Suppose that even though you have a $25,000 limit for all contents, a sublimit of $5,000 might exist on computers. This means that your policy will pay for a maximum of $5,000 for computer damage. However, the $25,000 limit will still apply for your cumulative claim total.
Also, most policies will only pay a damaged item’s actual cash value (ACV) at the time of the loss. Since most items lose value over time, cash value reflects the item’s used value at the time you make the claim. You will likely not receive full payment for a new item, even if its value is within your limits.
Keep in mind, deductibles will also apply to your losses. Your insurer will subtract this deductible cost from your final settlement. Any claim that falls below the value of your contents deductible will have not coverage at all.
There are ways to expand your limits, however. If you want more coverage for specialty items or higher policy limits, then you can often buy policy endorsements. These endorsements will expand your coverage. They might include replacement cost coverage for all possessions, or a scheduled item rider for contents of value. Let your agent help you tailor your coverage in the most effective ways.