There are several things you need to consider when starting a new business. One of the things you need to take into account is having property insurance coverage for your company.
As a small or big business owner, a property insurance cover helps you protect all your important assets, whether leased or owned, that are vital for your day-to-day operations.
These assets can be:
- Buildings
- Stores
- Offices
- Equipment
- Furniture
- Stock
- Accounts receivable
Defining Property Insurance
As already highlighted, property insurance is a policy designed to help business owners, both small and big, cover the costs to repair or replace company assets that may be stolen, damaged, or destroyed.
Although the terms and specific inclusions change from one policy to another, there are no significant market-level differences.
For this reason, policy terms, limits, and retentions are always customized taking into consideration the assets and acceptable loss limits for business property and revenue.
Types of Property Insurance Coverage
Generally, there are two main types of covers offered by insurance providers. They are:
- Replacement cost
- Actual cash value
Replacement cost: covers the financial costs of repairing or rebuilding property using materials of similar or comparable quality or standard
Actual Cash Value: Pays the current value of the damaged property as well as the cost to rebuild or replace property.
Property Insurance Policy Options
- General Liability Insurance
Most small businesses need this policy which covers costs related to risks such as bodily injury and property damage arising from your company’s operations, as well as lost income in case you are unable to run your business as a result of a covered loss.
- Commercial Auto
This type of policy is suitable for businesses that use vehicles in the performance of daily operations.
It can cover operations such as traveling between job sites, making deliveries, as well as transporting tools and equipment by offering protection from liability and physical damage claims against your company’s vehicles
- Professional Liability
If your business deals in providing professional services, this kind of policy is suitable to cover claims of professional negligence.
- Cyber Insurance
Electronic risks such as data breaches and cyber attacks can hurt your business significantly. Therefore, companies that keep or process sensitive information such as credit card information can protect their operations with this policy.
- Workers’ Compensation
This policy is designed to cover both you and your employees. Primarily, it helps cover costs such as medical expenses and lost income connected to members of staff who got injured or fell ill on the job
- Business Owners’ Policy
Commonly referred to as BOP insurance, this plan combines business liability and property coverage into a single policy.
Most small businesses prefer this type of policy in protecting their commercial buildings or personal business assets.
Beneficiaries of Property Insurance
If you own a business in Saudi Arabia, having property insurance is a mandatory requirement.
Without this cover, you may be forced to cover claims and damage expenses out-of-pocket, which can destabilize your business and put you at risk.
Regardless of the sector that your company operates in, property insurance is essential for your business. Some of the businesses that can benefit from this coverage include:
- Retail shops
- Financial institutions
- Advertising, graphic design, and media service providers
- Barbershops
- Plumbing services
- Electricians
Factors Influencing the Cost of Property Insurance Premiums
Similar to any other insurance plan, a variety of factors are taken into account before determining the premiums to be paid by the insured parties.
- Location
The location of your commercial property and whether it is exposed to natural risks such as floods can influence the cost of your property insurance premiums.
For example, buildings located in cities and major urban centers that usually have effective fire protection are cheaper to insure compared to those located outside urban areas or in areas where there is little to no fire protection amenities.
- Age
Your property’s ability to withstand damage is usually connected to its age. This aspect makes the age of the property another key consideration in the determination of premiums under this policy.
- Replacement Expenses
The cost of replacing your commercial property has a direct impact on the premiums you will pay when you seek a property insurance cover for your business. The higher the replacement costs, the more likely you are to pay higher premiums.
- Coverage Options
The type of policy you choose also has a direct effect on the premium rates you will be expected to pay.
To ensure you make the right choice, it is advisable to use an insurance broker who will assess your business risks and advise on the most suitable policy from a variety of options available in the market to address your unique needs.
- Insurance History
How long you’ve been insured and the number of claims you’ve made will also impact your premiums.
Benefits of Property Insurance
- Protection Against Covered Risks
While you can put in place all the possible preventive measures to minimize the exposure of your business to costly risks, the reality is that some threats are beyond human control.
For instance, when natural disasters such as fires or floods occur, they can cause serious damage or losses to your company’s property.
However, a property insurance cover allows you and your business to cope in case a covered risk factor causes loss or damage to your property.
- Avoid Business Interruption
In case your business is forced to close because of a covered risk such as mandatory temporary evacuation, you can receive compensation to keep your operations running depending on the type of property insurance policy you have.
For example, you can receive funds to either pay staff salaries or cushion you from depleting your savings.
- Achieve Financial Stability
A major repair or destruction of inventory or essential equipment can cripple a business. With commercial property insurance, you will have help recovering. Essentially, your company’s financial security will be preserved and you can have peace of mind that you can get through a tough time.
- Cover Repair and Replacement Expenses
After you submit an insured claim and pay your deductible your commercial property insurance will step in to assist you with any repair costs or, if the damage is too signficant, replacement expenses.
For instance, if your retail business suffered a fire your insurance cover could cover the repair of your building and replacement of any damaged or destroyed stock and equipment.
Now that you have a better understanding of commercial property insurance, you may be wondering how all of this affects your business and where to go from here.
Having a customized property insurance policy in place and a broker who can help you navigate the terms and conditions, as well as the claims process, can save you money and, more importantly, time.
IHC is the easiest way to intelligently insure any business, whether you’re a small business, startup, or large corporation.
Contact our team of property insurance experts and get a free assessment of your business today.
