Is your business underinsured?
Suppose a gas leak in your building causes a major fire. Would the amount of coverage you have on your insured property be enough to cover the loss of your building and all the contents?
The amount of insurance that appears on your policy for commercial property (building and contents) corresponds to your own assessment of the property.
When you take out commercial insurance, your insurer agrees to cover that amount. In the event of a claim, this is the maximum amount your insurer will pay. That’s why it’s worthwhile to do a proper assessment of your business’ goods.
Have your building assessed by a professional
Call on specialists to assess your building and give you an idea of the cost of rebuilding.
The appraisal firm will consider:
- The specific characteristics of your building (actual dimensions, complexity of the structure, materials used, construction year)
- What the building is used for (e.g., restaurant, hotel, shop, senior’s residence)
- Electrical, mechanical and related equipment (elevators, automatic sprinklers, fire alarm, air conditioner, etc.)
- Landscaping and parking areas
- Demolition costs (including removal of debris)
- Labour and material costs
- Building standards (from the Régie du bâtiment du Québec)
This type of appraisal should be done periodically (every 3 or 5 years) and take into account inflation and improvements made to the building.
Make sure building contents are covered too
The amount of insurance under the Contents portion of your policy is just as important.When assessing the value of your contents, you should consider:
- Furniture and valuables
- Telephone and computer systems
- Tools and machinery
- Products and merchandise
- Valuable documents and records
- Equipment and materials specific to your industry
Don’t leave anything out. You should also reassess the value of these goods periodically to make sure you have enough coverage in the event of a loss. Let your insurer know if your inventory fluctuates during the year or increases at a specific time (e.g., at Christmas) so the amount of insurance can be adjusted accordingly.
Insure your business income
A Business Insurance Package Policy generally includes Business Income Insurance. In the event of a loss, this covers your business income, rental income and certain employee salaries during temporary closure. If your income isn’t adequately protected, this could have a serious impact on your business. Again, when purchasing commercial insurance, it’s important to provide an accurate assessment of your income based on your financial statements.
Depending on the nature of your business, you should also estimate how long it would take to get your company up and running again after a loss. Think about how long it would take to rebuild, to restock your inventory and to replace sophisticated equipment. Depending on your estimate, it may be a good idea to enhance your Loss of Business Income protection.
Protect yourself from the risk of estimating too low
When carrying out a damage assessment, your insurer may also assess the replacement cost for the building and contents, depending on the type of loss.If you’re underinsured, you could be penalized because the insurer is only required to compensate you for the insurance amount based on your initial assessment. This amount may not be enough to cover the actual cost of the damage.
Some insurers also apply a co-insurance clause, which penalizes you even more.
Take advantage of your business insurance renewal
The best time to reassess the value of your commercial property is when you renew your commercial insurance policy. Take the time to carefully review the insurance amounts for the various coverages, taking into account your inventory, annual purchases and sales. This is the time to make any necessary changes. Remember, an accurate assessment is the key to ensuring your peace of mind in the event of a loss.
In collaboration with CLAUDE PELLERIN S.F.P.E., T.P.I. WILFRID TANGUAY INC.
Certain conditions, exclusions and limitations may apply. The terms and conditions of the coverages described are set out in the insurance policy, which always prevails. These tips are provided for information purposes only, are general in nature, and Desjardins Insurance cannot be held liable for them. We recommend using caution and consulting an expert for comprehensive, tailored advice.