Small business property insurance, sometimes referred to as commercial property insurance, is insurance that protects your assets — your property (tangible and intangible) and your inventory — against loss or damage from an accident, theft or some other cause. A property insurance policy for your small business covers the costs to repair or replace your property. In some cases, your small business property insurance policy will compensate you for irreplaceable items. Most importantly, the risk of loss is transferred from you, the small business owner, to the insurance company.
Small business property insurance can be obtained as a standalone policy or can be written into a package policy. Either way, you’ll need to identify all property and inventory that you want protected and included in your commercial property insurance policy. Once you’ve identified the property that you want to be covered, you’ll want to learn about the major categories (real, personal and intangible) of property insurance in order to select the most appropriate coverage.
Real Property Insurance. Land, building and improvements generally comprise real property. Fire, smoke, hail, wind, explosion, vehicle damage, vandalism, snow and sleet weight, sewage backup damage, landslides, volcanic eruption and earth movement are among the perils that real property is subject to and for which real property insurance may cover.
Personal Property Insurance. Personal property includes your personal contents and effects, finished products, work in progress, raw materials, contractor’s equipment, contractor’s tools, mobile equipment and property of other people. The same perils mentioned for real property, such as fire and water damage, apply to personal property insurance.
Intangible Property Insurance. Intangible property is sometimes overlooked as having substantial value. However, a financial loss of intangible assets can sometimes cause substantial hardship to the small business owner. Intangible property is essentially anything that has value in your business, but cannot be seen or touched. For instance, your accounts receivable account is an intangible asset that can have a high value on your balance sheet. Should a fire occur and you lose all your accounts receivable data, including client contact information and balances due, you may endure a far-reaching financial setback without having small business property insurance to protect you. Again, the same perils mentioned for real property and personal property apply to intangible property.
In summary, small business property insurance is a type of commercial property insurance that covers both your tangible and intangible assets from loss or damage. Identifying your property, including the intangibles, and determining the perils that your property is subject to is the first step in protecting your valued business assets.