Losing your business assets in a fire or other unforeseen event is a disaster, even if you re covered by insurance. If you re not insured, or if your policy is inadequate, that disaster situation could mean the end of your business. There s little you can do to solve the problem if you re not covered by insurance, so it s definitely worthwhile spending a little money now to save a big headache later on.
Before Choosing Insurance
Insurance companies tend to impose heavy requirements on businesses to make sure they take due care of their assets, both to minimize the risk and to reduce the possibility of fraud occurring where a company deliberately destroys assets to benefit from making a claim.
Before taking out a policy, there are some important things to consider. For example, what exactly constitutes a business asset? Is your mobile phone a business asset? What about the chairs in your home office? Many small business owners don t give this enough thought, and small businesses are usually the ones hardest hit by losses for this reason.
To decide whether an item is an asset, just consider whether or not your business will be hindered in any way if the item should be lost. If you regularly meet with clients in your home office, losing those chairs might constitute a business loss. Once you ve decided what your business assets are, they need to be evaluated so you can calculate a total amount to insure them for.
Another thing to bear in mind is that you ideally want an insurer who specialises in insuring the type of business you operate, and who understands the specific types of risks involved. If you re insuring heavy manufacturing machinery, for example, an insurer that understands the particular types of risks involved in maintaining and operating such machinery is important.
Finally, try to have a goal when it comes to the premiums you want to pay. The amount you can afford might change with business or economic cycles, so it pays to have a figure in mind that you can afford whether business is good or bad.
Before Signing
Before you go ahead and make the commitment, here are some more things to consider:
Read the documentation and look for clauses dealing with asset depreciation, exclusions, and faults. Make sure you understand exactly what s involved, particularly when it comes to depreciation of machinery and equipment.
Take note of any insurance company requirements, such as specific security measures you must undertake. Following these to the letter is important because your insurer company will have sound cause to reject a claim, and courts will almost always side with the insurance company in cases where the claimant has failed to follow the policy requirements.
Make sure you understand how the claims process works, including the length of time it takes to settle claims, and the types of documentation you need to provide when making a claim. This information is crucial to helping you minimize interruptions to your business if you have to make a claim.
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