What Is "Enough" Building Insurance Coverage?

Modern skyscrapers in business district at sunset

Your building is the single largest asset you have as a business owner. This means it's important - whether you occupy the building, are a landlord, or both - to consider your risks. That way, you can plan out your building insurance policy.

Stuff happens. There could be a fire, a flood, or a burglary. You might need major repairs or renovations. That's why it's important to get the right building coverage.

That way, when disaster strikes, no matter how big or small, you're never unprepared.

The Basics of Building Insurance Policies

No two building insurance policies are alike. Well, except when it comes to basics like:

  • Fire
  • Wind storms
  • Vandalism

Building insurance is about more than the building itself, too. Other (generally) covered items include:

  • Your building
  • Your outdoor sign
  • Your furniture and equipment
  • Your inventory
  • Your fence and landscaping
  • Others' property

Of course, different policies will cover different disasters/property and have different limits. Depending on where you are and what type of business you run, you should adjust your policy and coverage. 

Your Trusted Choice® insurance professional can help with that. 

Setting Building Insurance Policy Limits

Building insurance coverage is pretty standard. But an often-overlooked issue is the need to establish a limit. 

Don’t get caught up in accounting terms to determine the “full” value of your building. If you're looking at price paid or the cost you're carrying on your books, you aren't doing it right.

"Full value” is the total cost to rebuild your building from the ground up at today’s costs. Now ask yourself: Could you realistically rebuild for what you have it insured for? Remember, you will never collect more on your claims than the policy limits. Purchase enough insurance cover the real replacement cost.

Is Insuring to Full Value Always Best?

Some say that insuring to full value is excessive, since it seems unlikely that you will experience a total loss. We say you only need consider this: What if you do have a total loss? 

Here are your two basic options, depending on your goals:

  • If your goal is to minimize the cost of your premium by taking on some of the risk yourself: Have the insurance written to the full value, then choose a higher deductible. This limits your risk rather than creating an undetermined risk that exceeds coverage.
  • If your goal is premium savings: Pay the nickel and dime claims while maintaining coverage for the big hits. 

Once you have the basic safety net in place, you can add the bells and whistles that might make sense for your business.

Other Considerations While Setting Policy Limits

Let's say your building is older, and all new construction in your area must meet new building codes enacted in the past few years. You need to make sure your policy coverage will cover the cost of a new building, and not just your current one.

The Bottom Line

Sit down with your Trusted Choice® insurance professional and make sure you have basic building insurance with the added bells and whistles you actually need. Take all of the precautions mentioned above, and you'll be in good shape.

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