I’ve found that most small businesses set a limit for their Business Property when they first purchase their Insurance Policy and then never update it. So, they essentially forget about it.
If your Business Property remains consistent, like it does for most service businesses, it’s not a big deal. Most policies are going to include an inflation guard that will increase your Business Property amount each year to keep pace with inflation. For example, with my business being an Insurance Agency, I don’t carry inventory, I don’t have major equipment purchases to make. The only Business Property I have are my desks, computers and office supplies. So, unless I increase my staff requiring more desks and computers, my Business Property limit remains the same.
Other types of businesses, like contractors, retail stores, manufacturers, and medical offices, to name a few, need to review their insurance limit for their Business Property on a more regular basis. For example, the equipment in a dentist’s office is very expensive and needs to be upgraded periodically to keep up with the latest enhancements. I can guarantee that the new equipment is going to cost more than the prior equipment. And you typically don’t just upgrade one workstation, you have to upgrade all of the workstations to give everyone the ability to work on the latest equipment and have everyone in the office using the same procedures.
If you don’t remember to update your Business Property limit on your Insurance Policy when you make an equipment upgrade, you will find yourself in the unfortunate circumstance of not having enough insurance coverage to replace all your equipment in the event of a disaster, like a fire. That would mean you would have to come out of pocket or take a loan to replace all your prior equipment, which is not ideal.
We recommend consulting with your Insurance Agent whenever you make a large purchase for your business to make sure it’s covered properly. Also, you should be reviewing your Business Property Limit with your Insurance Agent at least every 3 years. You don’t want to find out at the worst possible time that you don’t have enough coverage.
