Having the right commercial insurance plays a significant role for large to small enterprises in overcoming the aftereffects of unexpected events and hazards. Choosing a proper insurance policy is not an easy task even for a seasoned businessman. So, to ensure that your business is neither under nor over insured and has necessary cover, it is imperative that you understand some basic concepts of insurance.
First of all, it is essential for proposer to have an insurable interest in the object of the cover in order to make the commercial insurance contract valid. This also aids in defining the type of property insurance policy that a businessman might need.
Under the policy, not only physical objects need to be covered for insurance but also the financial value which is defined as the interest that a policyholder has in object in case he/she suffers loss in insured risk.
The type of commercial insurance policy varies with factors such as ownership. It depends on whether the businessman is the owner of commercial property or a leaseholder or tenant.
The owner of commercial property who lets or leases the building has interest in building fixtures and fittings of the concerned property and any liability caused by them regardless of the type of business activities carried out there.
The interest of leaseholders in the building varies with the lease contract and thus, it should be thoroughly checked with the agreement and insurance policy. A contract, often, makes it the responsibility of the lessee to provide cover for the lease term.
On the other hand, owner occupiers of commercial buildings have financial interest in the building as well as the contents of the property and therefore, they require commercial insurance for both of them.
Generally, tenants don’t have to be concerned with the rented commercial property building cover. They have only insurable interest in the contents of the buildings and in any improvement that they have made to carry out their business activities.
Another important thing for businessmen is that before getting quotes for a commercial insurance policy, they evaluate the values of all the buildings, contents and stock. The value of buildings should be based on the rebuilding costs following a total loss and allowing for inflation as well. For contents insurance, accurate annual turnover figures are required. In case, high value stock items are stored or kept at the property, the value of such items must be calculated individually.
More importantly, providing the right information for commercial insurance proposal is not only mandatory legally but is also critical if you want to avoid problems in case a claim has to be made in the future. With wrong information supplied, several problems can arise with disagreements over the value of stock or office equipment following a major loss. This happens especially when declared values are not sufficient enough and an average or proportional reduction to claim is imposed.
So, it is better to be informed and equipped with knowledge of accurate values before purchasing any commercial insurance policy.