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Business Personal Property (BPP) Insurance: What You Need to Know

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The key to running a successful business of any size is being prepared for the unexpected and handling problems successfully when they do happen. While no one can prepare for every situation, having some kind of plan will help you respond positively to almost any eventuality. 

For a business, issues like flooding, fires, theft, or equipment failure are rare, but they can significantly impact a business if they happen. But, with the right plans and resources – like Business Personal Property (BPP) insurance – in place, a company can turn a crisis into an opportunity. 

BPP: Supporting the Business When it Needs it Most

While everyone understands the need to insure a business’ buildings and vehicles, just like people insure their own homes and cars, working out how best to ensure the contents of a commercial property is much more complex. Some items a company will own, others it will rent, and others it will lease. Understanding a company’s physical assets and their importance to a business can be challenging to define and understand. 

Let’s look at BPP in more detail, what it covers, and how a business owner or manager can get the right protection for their company so an insurance problem does not become a business issue. 

What Coverage Does BPP Provide?

BPP policies are essentially business property insurance for a commercial business. It covers the physical contents of a building, covering issues like damages and losses to its equipment. It complements a Business Owners Policy (BOP), which typically covers the physical infrastructure of a business’ estate and can include general liability insurance and business interruption insurance

What Should a Business Include in a BPP Policy?

What items feature in the ideal BPP policy will differ for every business.  

In any business, there will be some items of equipment that are core to the products and services it offers. This might be heavy equipment like forklift trucks, packaging equipment, refrigeration equipment, or machinery like 3-D printers, metal presses, or drilling equipment. It might also include an inventory of raw materials, components, or finished products. 

Other equipment items will help support the use of these core pieces, whether it be shelving units, PCs, or cooling and heating equipment, for example. These are important to the business but are not regarded as critical. 

Other equipment items, like furniture, printers, and PCs, will be vital in managing the business, whether found in the finance, sales, or marketing function for example. Losing these might be considered very inconvenient, but they do not put the business in jeopardy. 

What BPP Coverage Does a Business Need?

Again, the right coverage will be different from one business to the next, but understanding how different pieces of equipment items provide value to the business is an excellent place to start thinking. 

The easy option might be to just put a total value on the contents of a business’ estate and hope that it covers all eventualities. The problem with this is that an insurer might impose a coverage limit on an item or refuse coverage of specific types of equipment or risks, which managers only find out about when they make a claim. Another coverage limit might be only insuring items on a cash basis rather than a replacement basis. 

A better approach is to be more pragmatic about the type of coverage a business needs, to get the right coverage for the right equipment at the right price. 

The first thing to do, especially for the most critical pieces of equipment, is working out whether they should be insured for their cash value or their replacement value. Cash value means getting the cash equivalent of an item when a claim is made. This will take into account an item’s condition, its depreciation, and its actual cash value on the day of a claim. The replacement value accounts for the cost of replacing an item ‘as new’ regardless of its age and condition. 

Cash value protection typically costs less than replacement value coverage. That said, insuring for cash value might be the best way forward for some essential items, especially if a piece of equipment is to be retired over the next 6-12 months. For other items, the best approach may be to take out replacement value coverage, even if a piece of equipment is no longer manufactured to the same specification. It means that a company will be able to afford a modern replacement for some of its equipment. This is one way a crisis can be turned into an opportunity, by replacing old equipment with more modern upgrades which improve productivity.  

For less critical items, you can look at the problem in the same way. For items being retired, get cash coverage; for newer pieces, go for replacement value cover. 

But be careful. Where a company rents or leases equipment, the contract with a supplier may stipulate the type of coverage needed. In some agreements, especially rental agreements, insurance may already be included in the contract – so check first.  

How to Create the Ideal BPP Policy 

The key to getting the right BPP policy begins before a company even speaks to an insurer or insurance broker.

The most important thing a manager can do is to build an asset register, which may be straightforward in a small company, but might need the help of finance, IT, and procurement teams in larger businesses. Together they can give a manager a good understanding of the items used throughout the business and whether a business owns, rents or leases them. 

The next step is to prioritize them, to understand which items need the right coverage for the business. 

What Else is Needed?

Recovering from an incident, especially a significant one, takes time and effort that managers could better spend on running their business. So, consider the other services an insurer can offer when claiming, to help get a business back on track. While the money from a policy payout will undoubtedly help, working with an insurer who can help source replacement items and help plan their installation can go a long way to helping a business thrive after an event. 

Also review the other forms of insurance that might be needed, including business interruption insurance, to cover the costs of an interruption. Make sure there is enough liability coverage, so that should anything happen to a company’s employees, customers, or other third parties during an incident, there is enough cover in place. 

Get a Free Quote for your Business Personal Property Insurance. Complete the form at the top of the page or give us a call at 877-907-5267. One of our agents will gladly help answer your questions and get the business insurance you need.

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