How much business personal property insurance to have?

[wmpy]

It's time to renew my business insurance. When discussing the amount to be covered for the "Business Personal Property", the agent tells me that I should have a value that is the sum of the new replacement cost for everything in the shop. Looking at the number from last year, it seems light. So, when coming up with the amount to be covered, do you all really add up the value of every machine, tool, inventory, etc as if you had to buy it new? Or do you figure it's ok to under-insure by a bit because you could probably buy used to get what you need? Buying used is how we've purchased most of the major assets in this shop, by the way.

 

[Farmer Phil]

The method in which it is insured needs to be understood.

Is it insured on a Replacement Cost, Actual Cash Value (ACV), Agreed Value, etc.?

What is the co-insurance amount? Do you understand what co- insurance is with regards to P&C insurance?

Are there any tools that will exceed the maximum amount when property is insured on a blanket basis? If yes, how are these then insured?

 

[Farmer Phil]

Never fool yourself into believing that being under insured is of any benefit. If you're looking at saving money that way, just cancel your policies and go self- insured. My advise is to never go self- insured unless you have three million in which to park in an interest ranking vehicle and can do so for ten years.

 

[wmpy]

The method in which it is insured needs to be understood.

Is it insured on a Replacement Cost, Actual Cash Value (ACV), Agreed Value, etc.?

What is the co-insurance amount? Do you understand what co- insurance is with regards to P&C insurance?

Are there any tools that will exceed the maximum amount when property is insured on a blanket basis? If yes, how are these then insured?

According to the agent, it's replacement cost.

Co-insurance is 90%. I think I understand what that means.

I don't follow your last questions.

 

[wmpy]

Never fool yourself into believing that being under insured is of any benefit. If you're looking at saving money that way, just cancel your policies and go self- insured. My advise is to never go self- insured unless you have three million in which to park in an interest ranking vehicle and can do so for ten years.

Can you explain why you think this? Is there no middle ground between being fully insured and being self-insured?

 

[Farmer Phil]

It is very likely you have machines and tools that will exceed the maximum amount allowed for a single tool. Your large machines should be insured a part of the building, or on an inland marine policy-- scheduled, regardless of the particular policy.

Your coinsurance requirement is not favorable and even more reason to make certain that you are accurate with your values. This particular coinsurance requirement, requires the insured to have the insurance to value be at least 90 percent. Any less and the loss is going to be adjusted on an ACV basis as well as pay the insured merely a percentage of what they had it insured for.

There is no middle ground other than choosing to go without because an insurance company isn't going to fool with an insured that has $2mm in property, or $100k in property but only wants to insure half of it, but be made whole in the event of a loss. You can go negotiate bastardized coverage in which everyone is on the same page with what the insured is wanting, but it's going to be on a less than favorable coverage form and cost more than just doing it correctly with an admitted and filed insurance company.

 

[kb0thn]

In my experience, the business personal property insurance isn't really that expensive. $1M to $2M was a couple hundred dollars a year.

When I was just getting started I was very careful to keep updating limits and have it be as low as possible. After a few times adding $50k or $75k I realized that the rate wasn't changing at all. I was under minimums and was paying the same amount for less coverage. Finally I said give me coverage to match the minimum and got hundreds more of coverage for the same price. Then I spent less time talking to them and adjusting coverage because a big job was coming through the shop.

 

[Ox]

It's time to renew my business insurance. When discussing the amount to be covered for the "Business Personal Property", the agent tells me that I should have a value that is the sum of the new replacement cost for everything in the shop. Looking at the number from last year, it seems light. So, when coming up with the amount to be covered, do you all really add up the value of every machine, tool, inventory, etc as if you had to buy it new? Or do you figure it's ok to under-insure by a bit because you could probably buy used to get what you need? Buying used is how we've purchased most of the major assets in this shop, by the way.

"New"?

That's a sure fired way to make the value of my shop about 100x what it realy is!

Yeahhhh, I don't think so ....


"Insurance poor" is a term in and of it'self, but by over valueing would be a whole new form of...

IF that even happened, you would be ran so far through the wringer in search of fraud, that there wouldn't be any business to come back to even if you did. Agreed - not to under insure tho.


Tha'd be like buying a $3500 1974 Vette and parking it under a 150 yr old weeping willow during a March ice storm, hoping for a new 2023 Vette replacement.


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Think Snow Eh!
Ox

 

[Archer120x]

"New"?

That's a sure fired way to make the value of
Tha'd be like buying a $3500 1974 Vette and parking it under a 150 yr old weeping willow during a March ice storm, hoping for a new 2023 Vette replacement.


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Think Snow Eh!
Ox

"New"?

That's a sure fired way to make the value of my shop about 100x what it realy is!

Yeahhhh, I don't think so ....


"Insurance poor" is a term in and of it'self, but by over valueing would be a whole new form of...

IF that even happened, you would be ran so far through the wringer in search of fraud, that there wouldn't be any business to come back to even if you did. Agreed - not to under insure tho.


Tha'd be like buying a $3500 1974 Vette and parking it under a 150 yr old weeping willow during a March ice storm, hoping for a new 2023 Vette replacement.


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Think Snow Eh!
Ox

Business insurance isn't like personal auto at all. The insurance company has to get you making money again. My policy says if they can't find comperable used machines immediately, I get new. Its more like you are making $100 an hour off your vette under that willow tree. If the can't find you a replacement they buy you a new one.

 

[Farmer Phil]

Business insurance isn't like personal auto at all. The insurance company has to get you making money again. My policy says if they can't find comperable used machines immediately, I get new. Its more like you are making $100 an hour off your vette under that willow tree. If the can't find you a replacement they buy you a new one.

You are correct with regards to those issues being different.

However, could you post your policy language that states this promise from the insurance company to the insured? That is an impressive promise. I don't doubt that the coverage could be purchased, but I'd just like to see it in writing because of how improbable I believe it to be.

 

[gbent]

It is business continuation insurance. Typically not that expensive.

 

[Farmer Phil]

It is business continuation insurance. Typically not that expensive.

Are you referring to life insurance on a key employee or are you under the belief that Business Income and Extra Expense is magically going to provide brand new machines for an insured if they are unable to procure used machines?

I don't believe the policy language states this which is why I'd like to see it.

 

[SteveEx30]

The liability portion is by far the most expensive part for a commercial policy-atleast for a smaller business such as mine.

I have exaggerated #s for my building, cnc machines and tooling... It really didn't make a huge difference for my policy costs... Better to be safe then sorry.

 

[DouglasJRizzo]

I insured for full new replacement costs on everything.
The building collapse nearly drove me under as I had nothing for that, only liability if someone got hurt. Luckily the CNC's were unhurt but it could've been much worse. Now wiser, I got the most coverage I could.

 

[Ox]

OK, so what's the $ difference?

B/c you are insuring some mighty old iron for a lot of $.

???


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Think Snow Eh!
Ox

 

[DouglasJRizzo]

OK, so what's the $ difference?

B/c you are insuring some mighty old iron for a lot of $.

???


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Think Snow Eh!
Ox

You're right, I am.
But that old iron still generates good parts and is paid for. To replace it would unreal expensive. It wound up being an extra $250/mo which I could swallow.
When I moved to the new building, I got a reduction as the new building is steel framed concrete and sprinkler equipped.