You need property insurance to protect your business from fires, typhoons or burglaries, says Joel T. Almagro, first vice president and chief re-insurance and risk officer of Malayan Insurance Company Inc.
You may need a policy to cover your building and other structures, your furniture, inventory, equipment and supplies. You may also need a policy to insure your money and securities, records of your accounts receivable, machinery and improvements in your premises.
The events causing damage to property are called “perils,” and these include lightning strikes, burglaries and vehicular accidents. There are two types of policies covering perils: a “named-perils policy” covering losses only from perils named in the policy, and an “all-risk policy” covering all perils except those specifically named. All-risk policies typically have higher premiums, and may include coverage for additional perils if necessary.
Almagro advises small businessmen to secure property insurance to protect themselves. “Any hiccup in the cash flow or production may cause catastrophic loss to the entrepreneur due to his limited financial resources,’ he says.
But how are you compensated if your property is damaged? “Property insurance is usually categorized into the cost of replacing property at current market value or the cost of replacing the property minus depreciation,” says Eduardo Goloyugo, assistant manager for property underwriting with Standard Insurance.
Most experts agree that replacement cost value is better: it pays you enough to replace your property at today’s prices. “It’s protection from inflation,” Goloyugo says. Property inspection is the most important step in underwriting. “Premiums are pegged in relation to exposure,” says specialist Antonio Rubin. The more comprehensive the cover, the higher the premium. However, the premium varies depending on variables like your building’s construction, its exposure to hazards, its housekeeping, and the presence or absence of fire-fighting equipment. The insurance company usually will send an inspector to look at your business site to make a quotation. He can also make suggestions on how to minimize hazards to lower your premium payments.