Lesson 4 of 11
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Business Property Insurance

Collin Gabriel August 19, 2022

Key Terms

Actual cash value vs. replacement cost coverage – Your policy will either pay actual cash value or replacement cost for damaged or lost property due to a covered peril.

Actual cash value coverage – Reimburses you for the value of lost, damaged, or stolen property after depreciation is considered. It compensates you only for the value of the item at the time of the loss. Antiques or special interest items should be separately scheduled, either in the policy, or via an attached endorsement.

Replacement cost coverage – Reimburses you the amount it would take to replace, rebuild, or repair damage with materials of like kind and quality, without deducting for depreciation. Antique or special interest items should be separately scheduled, either in the policy, or via an attached endorsement.

Commercial property insurance – A policy that generally protects a company’s physical assets such as the building itself and the company’s personal property including equipment, furniture, computers, and inventory from covered perils.


Craig Vattiat (00:01):

So moving on to protecting your property, property insurance for commercial property insurance really protects small business owners from losses due to damage to that physical space, to the equipment that you have as a result of those covered perils and apparel is, uh, an event that could lead to a loss. Right? So for example, a theft would be a peril, a covered peril. Fire would be another example of a covered peril. You know, in addition to that physical building, if you do, um, have that physical building associated with your business business property can include lots of different items, whether owned or leased. So they don’t necessarily have to be owned by you. They could be, uh, items that you’re also leasing. So for example, your inventory, any furniture, machinery supplies, electronic equipment would also be covered valuable papers or documents, signs, fences, you know, outdoor property, not attached to your building and even non-tangible items like, you know, trademark and copyrights can all be protected through business, property insurance.

Craig Vattiat (01:16):

Um, and so again, this is why it’s really important to have that conversation with your insurance company, to make sure that they understand the property that you need to protect and then help to make sure that you have the right coverage, the right levels limits in place to, to really offer that full protection. You know, an example of this is, you know, unfortunately a lot of folks who have, let’s say a homeowner’s policy, they might have, um, you know, homeowner’s policy in place, but let’s say that they have, uh, a lot of jewelry in their home. Well, the insurance company is often gonna put a limit on that item, that jewelry, and, uh, maybe it’s $1,500. If you have jewelry, that’s valued at more than that, then that’s not gonna be coverage by your policy. So those are the types of things that you really wanna make sure your insurance company knows about so that you can get that adequate coverage. And of course, applying this to a business, you know, thinking about the different business property you have and then asking is this cover to the extent that I need it to be.

Joni McSpadden (02:20):

So Craig, if, uh, someone, if a small business owner has a home office, would their homeowner’s insurance cover that or do they need to go ahead and get commercial insurance for their home office?

Craig Vattiat (02:38):

Yeah, that’s a really good question, Joanie. Um, the, the business is gonna need to have that business insurance to protect the property related to their business.

Collin Gabriel (02:51):

Yeah. I think that, you know, a, a lot of, uh, the folks who work with ONAC are, are in the arts and, you know, there’s a great deal of supply. I mean, Joni you yourself, uh, are a Potter. And I, I think, you know, there’s probably a delineation. I mean, this is one of those examples where you probably wanna talk to your agent because even a homeowner’s policy might not cover or might, you know, cover to a point all that equipment where as, whether it’s a business or not, um, it’s gonna need some other extended form of coverage, but if it is a business, then that’s where you’d wanna have that commercial policy covering your, you know, your, uh, your wheel and all the tools and all the clay and all that kind of stuff. So mm-hmm, <affirmative> um, does that sound about right? Craig is like, I mean, the commercial policy is really meant to think of your business as a completely separate entity, even though it may be in your home, which is, you know, quite often the case with a lot of artists.

Craig Vattiat (03:44):

Right? Yeah. And, and that’s just a really important to think about there is that distinction between your personal coverage and your business coverage. Um, you know, we’ll talk a little bit about auto insurance and how, um, you know, those are separate. So if you’re driving your, your personal vehicle for work related items, then your insurance company might not, uh, pay that claim because you were really doing work associated with your business. So it’s really important to think of those things as separate and make sure that you have those different coverages in place, both for your personal life and for your business.

Craig Vattiat (04:22):

Um, one other really important note here is to understand the difference between what’s called actual cash value or replacement cost insurance. And you can buy either of those with business, property insurance. So actual cash value insurance just reimburses you for the value of that loss damage or stolen property after depreciation is considered. So you can think of it as what the item was really worth in the market immediately before its loss replacement cost insurance is gonna be different. It’s gonna reimburse you for the amount it would take to, you know, rebuild, replace, repair that damage. Uh, and here’s the key here with materials of similar kind and quality without deducting for depreciation. So that replacement cost coverage it’s really gonna be protecting you at a higher level than actual cash value coverage. So think about that and ask that question of your agent to determine, um, the cost difference of moving to that replacement cost coverage.

Craig Vattiat (05:34):

Um, one other note, if you can’t find business property insurance in the standard insurance market, then you can find that through what’s called the Oregon fair plan. The Oregon fair plan has some limited coverage, uh, covering only the physical building, you know, not your contents. Um, and it is something that can give you some protection if you’re not able to find property insurance in the, the standard insurance market. And that might be for areas where, you know, um, an insurance company finds that property in too risky of an area. And therefore won’t write a policy, uh, for your particular location, just a quick note that also applies to homeowner’s insurance as well. So if you have a hard time finding a homeowner’s insurance, the Oregon fair plan can protect you in that way as well.

Collin Gabriel (06:25):

And Craig do, is there a contact, uh, uh, information for the Oregon fair plan? Is it set like an agency or is it just a number you call, how does that

Craig Vattiat (06:34):

Work? Yeah, there’s a website associated with it. I think if you were just to, and I don’t have the website off the top of my head, but if you were to Google, Oregon fair plan, you’re gonna find that website. And it is, um, required by the state in order to have this kind of insurance market of last resort. Sure. Um, and, and all insurance companies are required to participate in that again, the coverage is limited, but at least it provides, um, all Oregon consumers with an opportunity to get coverage.

Collin Gabriel (07:02):

Okay. I’ll make sure to link, uh, to that website and the show notes for everybody watching.