Top 5 Things You Need to Know About Insuring Your Business Against Fire Damage


Fire damage can completely devastate a business beyond repair and even financially handicap a business irreparably. Revenues may be disrupted as the physical structure cannot remain in operation. A recent study reports that there were about 1.6 million fires in 2006, which resulted in a staggering $11.3 billion in direct property loss. On the bright side, fire damage is a risk that can and must be insured against.

Choosing the right business insurance for your company may be a daunting task. Luckily, most property insurance policies and business owner policies cover basic fire losses. However, these policies are often broad in scope and list a number of perils while excluding others. This is where business insurance can get tricky, especially because fire insurance for your business can be purchased as a specific peril policy, or according to a specific endorsement. It is important for business owners to understand what exactly is being covered under a more traditional broad form policy and find ways to optimize on coverage. Be sure to review appropriate considerations when you go about reducing the premium.

The first most important thing to know about insuring your business is that you insure for the proper valuation of your business. Many small business owners find that if they insure for a lesser amount than what their business is actually worth, premiums are lower; however if a loss occurs, a penalty will be applied to the settlement amount, which could end up being a lot more of a convenience and headache if that happens. So bottom lines, always insure for 100% of the business value, and adjust coverage as necessary.

Secondly, make sure you understand the difference between actual cash value and replacement cost. High value equipment for your business is something you should definitely get insured according to actual cash value, not the depreciated cost (replacement cost).

Third, certain properties need separate coverage, as these items will be excluded from the coverage. Generally these items include cash, valuable papers, some inventory, jewelry, and electronics since these items have no way of confirming and may be easily staged.

Fourth, Business Interruption Insurance will insure against the loss of revenue that goes hand in hand with any potential relocation costs. This is a separate policy and will significantly help you if potential periods of closing time will destroy your business.

Lastly, if your business has to be rebuilt, due to fire, or to adhere to building codes, you should make sure you have coverage to rebuild without pulling money or lost revenue out of your pocket.

Other points you should consider about insuring your business for fire damages is that annual review of your policy can end up saving you a lot of money. Make sure if you own many buildings or business that a blanket fire policy covering all your business, which can significantly help save on business insurance premiums.

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