In the article "Do the Insurance Thing for Your Holiday Bling," the Chicago Tribune reminds homeowners to upgrade their Property Insurance policies when they acquire expensive gadgets over the holidays. The same rule applies to small businesses and tech freelancers as they invest in new technology.
From time to time, you need to take stock of your commercial property and figure out whether you need to update the Property Insurance portion of your Business Owner’s Policy (BOP).
If you don't update your policy, your commercial insurance will only cover the value of the property you listed when you first started coverage. As your business expands, adding new gadgets, computers, technology, and furniture, the value of your property will increase. An old Property Insurance policy might no longer be sufficient to cover all your gear. If a fire wiped out your office, you would only have a fraction of the coverage needed to rebuild.
Here's what you need to know about when and how to update your business Property coverage.
When and How to Update BOP Policies to Cover New Investments
Updating insurance is a good thing: it means your IT business has grown. You've acquired new tools, electronics, inventory, or other property. It can mean you've purchased a new office space or expanded into a better location.
But how do you know which investments, technology, and other property need to be covered with a new policy? Read on for answers.
- When to upgrade. You won't need to update your policy for every new thing you buy. If you purchase a spool of network cable, there's no need to increase your coverage. However, Property Insurance policies often require you to itemize any expensive property (anything worth more than $500 or $1,000 dollars). These more significant items are listed on a separate schedule that needs to be kept up to date. In addition, it's a good idea to review your total inventory every three to six months to see if your supplies have grown to a value that requires you update your policy.
- How to update coverage. Updating coverage is simple. All you have to do is call or email your insurance agent. If you need to itemize any major additions to your property, your agent will update your insurance schedule.
Insurance tip: add a six-month reminder to your calendar to help you remember to take stock of commercial property. We also recommend you perform semi-annual risk assessments, a strategy we outline on the TechInsurance blog in the post "When Was Your Last Risk Assessment?"
Customize Your Property Insurance Policy and Reduce Your Premium
Insurers will customize a BOP Property Insurance policy to cover the specific property owned by a freelance developer, IT contractor, or other small technology business. But these policies can be customized further to help you save a little bit of money.
Here are two ways IT professionals can lower their Property Insurance premiums:
- Tweak premiums / deductibles. Like all insurance policies, the cost of Property Insurance is partially determined by your premium and deductible. The higher the deductible, the lower the premium. Some small-business owners are mostly concerned with covering themselves from a major property loss like a devastating fire that wipes out all their property. For these companies, a higher-deductible plan might make sense because it offers lower monthly payments. In other words, they could handle replacing property up to $2,000 or so (the deductible amount), but would need insurance benefits to kit out a whole new office.
- Switch to a cash-value policy. Property Insurance reimburses you for the value of your property, but there are different ways to evaluate your commercial property. A cash-value policy costs less, but offers less coverage. It only reimburses you for the depreciated value ("cash" value) of your computers and other property. On the other hand, a replacement-value policy covers the cost to replace damaged property with brand-new equivalents. Small-business owners who want lower premiums can switch from a replacement-value to a cash-value policy if they are willing to sacrifice some coverage for lower costs.
Of course, by lowering your rates, you often lose a little bit of coverage. This is a decision that each IT company has to make for itself.
To learn more ways to lower the cost of IT business insurance, check out the blog post "How to Fit Business Insurance into your 2014 Budget."