Business contents insurance, also known as commercial contents or business assets insurance, is designed to protect a company’s possessions and equipment kept at the business premises. It can pay out if any of the business’ contents suffer damage resulting from a fire, flood, theft or another insured event. Business contents insurance is not a legal requirement, but many companies choose to take out a policy to protect their assets, particularly if they hold large amounts of stock on site.
This type of policy can cover the cost of repair work on the contents or even the cost of fully replacing items that have been damaged beyond repair. Policies can cover items as small as mobile phones, all the way up to factory-grade machinery.
Coverage
Business contents insurance can provide cover for a wide range of events which are outside the business owner’s control, which lead to damage or destruction to a company’s possessions. Business contents insurance typically pays for the costs of repair for any items damaged by an insured event which could not have reasonably been prevented. Usually, these events are results of extreme weather or a break-in. If the contents on the policy aren’t repairable, the businesses insurer can pay for their replacement, too. Most contents policies can protect items damaged or destroyed in the event of the following:
- Fire
- Flooding
- Storms
- Malicious Damage
- Earthquake
- Explosion
- Theft.
When you take out a policy, you will have to give details of any items in the property and value the items owned by the business. Business contents policies tend to offer cover for the following equipment, objects and materials as standard:
- Fixtures and Fittings – This can include flooring, lighting, office equipment or kitchen utensils and appliances
- Furniture – Such as desks, chairs, shelving units
- Office Equipment – This might consist of computers, printers, scanners and modems
- Manufacturing Equipment and Tools – this can cover a broad range of tools and machinery related to producing or packaging goods
- Personal Belongings – The belongings of any staff or clients in the building.
These features tend to appear with varying levels of indemnity on a standard business contents insurance policy. Alongside these fundamental features of cover, many insurers offer extensions, such as stock stored on the property or cash left in the premises. Many policies can also cover specialist equipment, such as expensive computer systems, generators or electrical items, so long as you provide details when you take out the policy.
It’s also worth noting that you can insure intangible assets as well as physical ones. These might be patents, copyrights or valuable business data stored on paper or computers, that may be destroyed in the event of a fire or insured incident.
Business Contents and Stock in Motion
Many companies rely on sending employees away from their business premises. This might be to attend important meetings, to visit clients or simply travelling between multiple business premises. On public transport or on the go, you’re at a higher risk of theft or accidental damage. If your senior sales consultant has their phone stolen on the bus or drops their laptop on the way to a meeting across town, they might be unable to contact clients or access crucial files for presentations, which may, in turn, lose you business. That’s why many contents insurance providers offer various forms of cover for items on the move.
One option is an ‘all risks’ policy. This kind of insurance can cover your portable equipment when you’re outside your business premises. Cover of this kind only applies to specified items, such as laptops or phones that employees regularly take off the premises. Depending on the insurer, an all risks policy can even include cover for work items taken abroad.
It’s also possible to insure your stock on the move, as well. Some companies attend trade shows to network and generate business. If you’re transporting items to a trade show or if you’re selling products at a fair, you can cover your stock while it’s in transit and at these events, offering peace of mind if the goods are damaged or stolen when they’re taken offsite.
Contents insurance may work differently for mobile businesses who are always on the move. If this applies to your business, check with insurers to see if they can offer cover suitable for your needs.
Typical Exclusions
A business contents insurance policy tends to exclude any damage caused by general wear and tear. Some business contents policies can cover items damaged by theft or attempted theft, or replace items stolen completely. However, insurers typically do not cover theft if doors or windows were left unlocked. You may have to provide evidence of the security of the property, including entrances, windows and delivery hatches if you want to make a contents claim concerning a theft.
Some policies come with security requirements to cover any contents which are stolen, such as fitting specific types of lock or installing CCTV cameras. Be sure to check your policy and secure your property appropriately, so you don’t find yourself liable for replacing your equipment yourself.
Many policies, particularly tailored office contents policies, exclude manual work away. You might operate a business that is run from an office, but if work also takes place on client property, equipment may not be included as standard in these instances. If this applies to your business, it is worth speaking with an adviser on whether you’ll have cover for equipment used on client property before you take out a policy.
Similarly, for companies insuring their stock on the move, insurance providers typically exclude cover for couriers who transport third party goods.
Businesses that Need Contents Cover
Not all businesses choose to take out contents insurance. Whether or not you need it depends primarily on how much contents you have on your premises, and how much it would set you back if you had to replace everything you own.
Any business storing a high volume of stock should also consider business contents insurance. This is particularly relevant to retail companies, which might keep millions of pounds worth of goods in storage in a warehouse or factory. If a fire were to burn the premises to the ground, the business could be at risk of folding following such a significant loss.
The simplest way to determine whether you need business contents insurance is to add up the value of your business assets. You can then weigh this figure against your quote for contents insurance, to see how much you could save if the worst were to happen.
Some industries tend to rely on contents insurance more than others. Many providers offer specialist contents insurance policies for specific industries, such as tailored policies for the retail sector, offices, salons or surgeries.
Assessing Coverage Needs
How much cover you need depends on the value of the contents you are hoping to insure. It also depends on which type of contents policy you choose, as there are two ways that you can take out cover for your contents. The two models are:
- Replacement as new policies. If your items suffer damage beyond economical repair, the insurer will pay for the value of a brand-new replacement.
- Indemnity policies. These pay for the actual cash value of the items, paying out for the cost of replacing them at its current market value. This figure takes into account depreciation over time as well as wear and tear. For some insurers, an indemnity policy refers to the initial purchase price, instead, which might be even less. Make sure you understand your insurance provider’s definition of an indemnity policy for clarity on the level of cover you have.
Most companies choose replacement as new policies so that they don’t have to put any funding towards the repair or replacement for items that have increased in value. Once you’ve decided on the level of insurance you need, it’s time to value your contents to figure out the extent of cover you require.
Valuing Equipment and Stock
Up to 80% of businesses underinsure themselves, and up to 40% of these are then unable to re-open following a catastrophe as they cannot cover the remaining losses themselves. It’s therefore crucial to value your assets correctly to get the right level of cover. Insurance providers will also need to know the total value of all the items you want to insure to work out an accurate quote for your premiums.
If you’re opting for a replacement as new policy, be sure to use the replacement value of each asset rather than its initial purchase price, and use these figures when working out the total value of your business items. This is particularly crucial for specialist equipment or machinery, that may have vastly increased in value since you bought them years ago. If this were the case and you had provided the value you paid for the items, you’d leave yourself underinsured, meaning you’d have to bridge the gap with your own funds.
Some policies include cover for stock as standard, or this may come as an optional add-on to a contents policy. When valuing the stock in your business, ensure that you take into account seasonal fluctuations. Swimwear companies may hold significantly more stock just before the summer months, for example, whereas toys stores might have more stock onsite on the run-up to Christmas. Bear in mind the amount of stock you have onsite in your busiest periods and account for this in your estimation, to avoid underinsuring your assets.
Home Businesses
Most people have a home contents insurance policy in place to protect their household items in the event of fire, flooding or theft. Should a burglar break in and steal some of your belongings, including an expensive laptop, one of the first questions the insurer may ask you is whether you use the computer for business or personal use.
They ask this because many home contents insurance policies exclude any equipment used for business purposes. If you use the stolen or damaged item for business, your home insurance policy is likely to deny the claim. What’s more, if a burglar stole both personal items and items you use for work, you may not be able to recover the costs of replacing your household items, either. Failure to disclose that you work from home may invalidate the whole claim, or even the entire policy, leaving you vulnerable to cover all your items.
If you operate your business from home, your home contents insurance may be able to cover you for work-related items, but only if you explicitly arrange it with your supplier beforehand. If you already have a home contents insurance policy in place, it is worth contacting your provider to see if you can add cover for your tools and equipment to your policy. Otherwise, you may need a separate business contents policy. Many providers offer insurance products tailored to home businesses, to insure all your goods in one place.
Final Thoughts and FAQs
Disaster can strike at any moment, and if your business premises are affected, operations can grind to a halt. However, business contents insurance can insure your valuable equipment, machinery, stock and portable items, mitigating the impact on your accounts and enabling you to continue trading as smoothly as possible.
Anybody operating from business premises, whether it’s an office, a salon, a warehouse or a shop, should consider insuring the items inside. Not only can a policy cover the cost of repairs or replacement in the case of damage, but they can help you make this happen as quickly as possible, allowing you to return to business as usual, as soon as possible.
