Property Insurance And Perils Covered

More than 90% of the time, property insurance for small businesses is written in one of three forms or types of coverage - Basic Form, Broad Form and Special Form. Special Form coverage is the most common and affords the best protection.

Whichever policy you choose, read it carefully before you pay it - not just when you've suffered a loss. You may discover that some coverage is narrower than it first seemed. For instance, smoke loss may refer only to loss caused by a faulty heating or cooking unit; it may not cover smoke damage from industrial equipment. Similarly, an explosion may not include a burst steam boiler.

Fortunately, most insurance policies today are written in plain English so you should have little problem in understanding what's covered and what isn't. If you need coverage not provided in the policy, talk to your agent about how to add it on.

Basic form coverage includes losses caused by fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles but not loss or damage caused by vehicles you own or operate in the course of your business, riot, vandalism, sprinkler leaks, sinkholes and volcanoes. The policy defines these perils and lists some exclusion such as nuclear hazards, power failures or mudslides.

Broad form coverage contains everything that's in the Basic Form and adds protection from a few more perils, including breakage of glass that is part of a building or structure, falling objects, weight of snow or ice, and water damage. Again, these terms are defined in the policy and again, exclusions are listed.

Special form policies are constructed differently than Basic and Broad Form policies and offer wider and slightly more expensive coverage. Instead of listing specific covered perils such as fire and lightning, Special Form policies simply say that your business property is covered against all risks of physical loss unless the policy specifically excludes or limits the loss. This type of policy offers the most protection. For example, it's a convenient way to insure against loss by theft, which isn't covered by Basic and Broad Form policies.

If you need additional coverage and if you're concerned about property loss caused by perils not covered or in the case of a Special Form policy, excluded from an insurance policy, you can often get the additional coverage through an endorsement to the policy by paying additional premium. For instance, such coverage is usually available for losses due to earthquake and floods.

Earthquake insurance can be handled through a separate policy or an endorsement to Basic, Broad or Special Form coverage. Sometimes, it's an addon to your home insurance quote. Insurance companies typically state deductibles in an earthquake endorsement as a percentage, such as 10%, rather than a dollar amount. This means that the higher your policy limit, the bigger deductible. Flood insurance, by contrast, is usually handled through a separate policy called Difference in Conditions.

You can purchase property insurance as stand-alone and buy a separate stand-alone policy for liability coverage, or you can buy a policy that combines both coverages. It's often, but not always, cheaper to buy a combination policy. Here's where comparison shopping definitely pays off.