Insurance: Are you correctly insuring your property?

By Jeffrey Cotto
Often, one of the most valuable assets an individual or business owns is property. It is critical to ascertain whether your property has the appropriate coverage to protect you in case of damage or destruction.

In addition to covering your assets, insurance companies often impose penalties for not carrying the correct amount of insurance at the time of a claim. Let’s review how to correctly insure your building and business property so this doesn’t happen to you.

Building coverage
We often get asked, “How much should I insure my building for?” There are a few things to look at when valuing your building: the year built, type of construction, square footage and quality of construction all play a role in determining the amount of insurance you need to carry.

Real Estate Value and Insurance Replacement Cost often get confused. Real Estate Value is how much you could sell the property for today. Replacement Cost is the cost to rebuild the property to the way it was before the loss occurred.

The best way to determine if you have enough building coverage is to have an insurance replacement cost appraisal done. A professional will prepare a report that shows you the replacement cost of your property as it sits today.

You can also check with your insurance agent or a local contractor to see if the cost per square foot you are carrying is adequate for today’s standards. For example, a few years ago, we were seeing frame construction built and replaced for $100 to $125 a square foot. Now we are seeing frame construction at $200 and up.

Business Personal Property coverage
Business Personal Property is all of your contents inside the building. The best way to think of contents is this: If Superman turned your building upside down and shook it, everything that fell into the street would be contents.

Therefore, office furniture, inventory, stock and goods for sale, equipment, and so on can be considered business property. You want to carry enough insurance to cover the replacement cost of these items. Oftentimes, clients have not taken an updated inventory or underestimate in other ways what it would cost to replace all of their contents in a total loss.

There are some important insurance terms and coverages to consider when reviewing your property insurance policy. The following list contains just a few of the important coverages to review and discuss with your agent. It is critical to go through all of the important property coverages with your agent at least annually to ensure that you and your business are fully protected against damage or loss.

* Replacement Cost − Replacement cost is the actual cost to replace an item or structure at its pre-loss condition. When insuring a building and/or personal property you will usually want replacement cost, so that you can effectively replace the loss at today’s costs.

* Agreed Amount − This can be a very important aspect to have as part of your property policy as it suspends coinsurance, which is a penalty the insurance company uses for not having enough insurance at claim time. This is not automatically given. The insurance company has to agree with the amount of insurance you carry in order to provide this coverage. When possible, you always want this coverage.

* Blanket Coverage − When you have multiple buildings or locations, it is essential to have blanket coverage. Blanket coverage provides you with a bucket limit of building and business property insurance, as opposed to having a specific limit at each location.

For example, you own two buildings and insure them each for $500,000. One night you have a large fire and one of the buildings is completely destroyed. The cost to replace the building is $700,000. It seems that you are underinsured by $200,000. You call your agent in a panic and he says, “Don’t worry, you have blanket coverage.” Blanket coverage combines the individual limits for both buildings to $1,000,000 total and can therefore be used to cover the building with the $700,000 loss.

Property coverage is a complicated topic, and one that must be clearly understood by you and your agent. Be sure your agent is addressing all of these considerations.

Jeffrey Cotto is Vice President, Business Insurance at Rogers & Gray Insurance. He can be reached at or (508) 760-4621.

Extra Tidbit:

Mike Wiggs, of US Infrared Inspections based out of Maryland, says “Choosing the correct insurance is crucial! If you have a large office if may benefit you to get a infrared camera on your panel to see if you can prevent a fire. Having an infrared inspection is like getting extra insurance on your building!”. Check them out on Facebook!

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