Wednesday, August 22, 2012

4 Business Insurance Pitfalls to Avoid

Business interruption insurance
More than 50% of businesses never reopen after a fire because fire insurance does not cover income downtime". It also does not cover temporary relocation, salaries for key employees, or the additional costs involved in rebuilding. “Business interruption” is optional coverage that you should seriously consider adding if your business will be destroyed by being closed. Most business income policies only pay for 12 months of lost income but longer terms are available.

Actual cash value versus replacement cost
Most business policies cover a fire loss with “actual cash value” instead of “replacement cost”. Not good. Actual cash value pays the amount of the property less depreciation. This can be devastating if your business relies upon high value equipment that has a long life, but would be prohibitively expensive to replace. Replacement coverage, on the other hand, pays whatever the lost property’s replacement cost is today.

Coverage to rebuild according to current building code
Many businesses work in structures that are older than current building codes. In some cases, the structures are "grandfathered" and do not have to comply with current modern standards. When a fire occurs, however, the new construction must meet those standards and the extra cost is not covered. If you have a historic building, make sure you buy a rider to cover the cost to rebuild to current codes.

Always insure for 100% of your business value
If your business is insured for less than it’s worth, and a loss occurs, a penalty is applied to the settlement amount. This penalty will almost always exceed the amount of money you saved on premiums and will come at a very bad time. Have an independent appraiser evaluate your business each year and adjust coverage as necessary.

Could you rebuild your business if it burned to the ground? Come into Allied Brokers for a review of your current policy. We’ll point out gaps that could put you out of business for good.

Visit our website at www.alliedbrokers.com for information about all the types of insurance we offer. Or call 1-888-505-7988 for a free rate quote.

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