For most businesses there’s an array of moving parts behind your brand name: logistics that enable you to run your operations and service your customers. It would be difficult to sustain your business without them, which is why you want to make sure these assets are adequately protected.
Your business assets are typically your premises, plant, equipment, office and fittings, technology, vehicles and stock. These assets could be destroyed or lost due to a disaster, theft or other disruption, so insurance cover to replace them quickly and enable maintaining business operations is valuable risk protection. Businesses with loans to pay for assets may also require insurance as a condition of the financing.
The most important thing is that you have sufficient cover for your assets and that the sums insured will allow you to replace them at current market value and minimise the impact to business trading in the event of any incidents.
Check your business asset insurance coverage is suitable with these three steps.
Step 1 Understand the type of cover that protects business assets, and any limitations
Commercial property insurance is usually part of a business package. Buildings, equipment, office tools and stock are typically protected against accidental damage and theft.
Your insurance broker can help you ensure that you’re also covered for damage from natural disasters such as floods or fires, as well as deliberate damage, from vandalism, for example. They can also double-check inclusions and exclusions as they apply to your business, and that imposed sub-limits will cover total replacements.
Also ensure that you have adequate cover for machinery breakdown or equipment malfunctions. Your computer system and personal devices are also business assets that will need separate cyber insurance against breakdowns or security breaches. Remember your systems contain all your intellectual property, in many ways your most valuable asset, as well as client or customer data.
If your commercial vehicles play a role in your business activities they also need to be insured against damage or theft.
Step 2 Assess the value of your assets
To assess the value of your assets you need to consider the value they contribute to your business in generating revenue as well as what you paid for them and their replacement cost in current terms. Be aware that you may need to allow for depreciation for age and wear.
Making a list inventorying all of these items helps you make sure you have included everything and assigned appropriate values.
- List each item and record the year of manufacture, brand, model number and the date of purchase with a copy of the receipt if possible. Duplicate these records and store in a safe place.
- Take photos to support future claims. Have any items that may have appreciated in value appraised before you take out or renew your insurance.
- Amend your inventory as you purchase additional items, and update the values at least once a year before insurance renewal.
- If you’re in retail you want to take stock level fluctuations into account. Your insurance needs to cover the maximum levels you carry. Look for a policy that allows for seasonal increases.
The value that these assets contribute to your business should be a consideration in how much you insure them for (sums insured). You may opt to insure critical high value items for full replacement if the disruption to your operation without them would be extended and costly. If these items are also expensive and specialised you might want to consider industrial special risks insurance, which is designed to protect large investments in plant and machinery.
Step 3 Factors that influence the insurance terms, pricing and cover available to a business
With many influences that contribute to risk of loss, the insurance process involves being prepared to provide accurate information about your assets and your business operation to enable productive cover to be offered. Factors that influence your cover and information required include things such as:
- the risks involved with your business: if you work with heavy machinery or whether your operation includes travel for deliveries, for example
- the materials in your buildings and products or stock, or your manufacturing processes: if your factory is insulated with expanded polystyrene sheeting, for example, or you work with environmental pollutants
- your location, especially in relation to the likelihood of damage from events like cyclones or flooding
- what risk mitigation measures you have in place, such as fire sprinkler systems or security for your premises, or a maintenance schedule for your equipment
- your previous claims history also influences how insurance underwriters perceive your level of risk.
An insurance broker who knows your business and industry sector can help guide you in identifying assets that should be covered and what sort of risks apply to your situation.
Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient’s industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers’ control.
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