Businesses, big and small, face an array of unpredictable risks and challenges that can be hazardous to the longevity of a company. Business property is a significant set of assets at risk of theft and accidental damage due to fire or natural disasters.

Loss of these assets can lead to major loss of income and even a complete standstill of business processes. To mitigate this, it is recommended – and sometimes even required – that you have business building and contents insurance.

It can be stressful and time-consuming to try and find the right business property cover. The guide below provides an easy-to-follow breakdown of everything related to business property insurance. With this guide, you’ll be able to make informed decisions regarding insuring your business.

What Is Property Insurance for Business & Why Do You Need It?

Business property insurance covers business assets such as company buildings and the contents of the building that belong to the company.

It is essential to have business building insurance to avoid paying massive amounts of money out of pocket to rebuild or repair damaged property. The cost of repairing or replacing damaged property can lead to the business shutting down if the owner does not have the funds at hand.

Property owners who rent out their property also face the loss of rent payments in the case of damage. While tenants may face displacement, business employees may also face loss of income.

Having property insurance for business reduces these significant risks and helps put your mind at ease in the case of an emergency.

What Is Business Personal Property?

To understand what your property insurance policy does and does not cover, it is essential to know what is considered business property. Business property includes:

• Business buildings such as offices, stores, restaurants, storage locations.
• Office content such as computers, printers, and furniture.
• Specialized equipment.
• Cash kept on the business premises, like petty cash, staff payments, or money in the till.
• Outdoor business property such as gardens and fences.
• Business emergency property like fire extinguishers used during a fire emergency or generators.
• Stock kept on business premises, including business-owned storage facilities.
• Business documents like contracts and deeds.

It is important to note that every business property insurance quote will include and exclude certain aspects of business property cover. Business documents and safety infrastructure cover, for example, may be offered as optional add-ons.

Off-premises property such as storage locations and business property in transit are optional but essential add-ons to a business property insurance policy.

To get the business premises insurance that suits your business’ needs and priorities, you need to identify which assets you want to be included in your cover.

Make sure to go over the policy with your insurance broker so you’re fully aware of what will and won’t be covered.

What Does Property Insurance for Business Cover?

Business buildings insurance covers loss of assets due to:

• Theft of property.
• Intentional or accidental damage.
• Damage due to acts of nature such as hail, earthquakes, lighting, or storms.
• Geysers and pipes.
• Damage due to fire disasters.

Always pay close attention to insurance quotes and contracts to note exceptional cases where your insurance company won’t cover the loss of assets.

Insuring Business Property for The Right Value

A vital thing to know before applying for business property insurance is the value of your business property.

You can insure the business property for the replacement value or the actual value. The value at which you choose to insure your property will depend on factors such as your ability or willingness to rebuild your property.

The replacement value for a property is the amount of money needed to rebuild the property. This includes the cost of designing and reconstructing the building. The actual value, or Actual Cost Value (ACV), refers to the value of replacing the building minus depreciation.

The coverage you decide on will influence the price of your premiums. It is thus essential to determine the true value of your property. Incorrect property valuation can lead to the property being over-or underinsured – both cases involve loss of money.

Many insurance companies have property valuators that can assist with determining the correct value of the property you wish to insure.

Factors That Influence Business Property Insurance Cost

The price of business property premium will depend on the following factors:

• The value of your property
• Property location
• Risks related to your business industry
• Insurance limits
• Company size and number of employees

Making Timeous Provisions for Business Property Repair or Replacement

Along with determining the correct value at which you should insure your business property, you’ll also need to consider repair or replacement time.

Replacing or repairing a damaged building can be a long process. The property building process will entail an assessment of damages, the insurance claim, the architectural design process, design and project approvals, and the eventual construction period.

During this process, business processes can come to a standstill, or property owners can experience loss of tenant payments. The replacement of essential equipment can also lead to stagnation in business activities which can cause a big blow to business profits.

Small Business Property Insurance

Small businesses face a higher risk of standstill if not adequately insured against property damage and loss. There is often less money at hand to accommodate such unpredictable instances. It is, therefore, vital to have property insurance as a small business owner.

Does Homeowners Insurance Cover At-Home Business Property?

Many small businesses in South Africa operate from home. It may be unclear which insurance to take out to protect your home and business property as they overlap.

While homeowners insurance will cover any damage to the building, certain business property, like files, equipment, and technology, may not be covered. Therefore, business personal property insurance is essential to accommodate any loss of company property.

Home-based businesses may also need to consider liability insurance. This insurance will cover business owners in the case of accidental harm done to a client, such as food poisoning or accidentally burning a client’s hair with a hair styling tool.

Before starting your home-based business, you’ll need to inform your home insurance provider as your home business activities may impact your policy. Not informing your insurance provider of your home-based business can lead to problems in the future when you’d like to make a claim.

Many Insurance companies have home-based business insurance policies that cater specifically to home-grown companies’ needs.

Do You Need Business Property Insurance As a Property Tenant?

If you rent a studio, office, or property in a shopping centre or business district, the property owner will likely have business property insurance.

However, your own business property, such as electronics, equipment, and cash, are not covered under the property owner’s policy. You will still need insurance to safeguard yourself against any damages or loss of business personal property.

In order to protect yourself, it is essential to know what type of insurance your landlord has on the building. This way, you will know what damages you may be liable for – for example, if a fire breaks out at your business.

As a tenant, your business property insurance policy can be tailored to cover your specific needs while excluding buildings insurance.

Making Provision for Loss of Income

South African businesses face challenges such as load shedding, flooding, and protests. These challenges pose risks to business operations and can lead to property damage.

The loss or damage of property can lead to business operations either being brought entirely to a halt, stagnated, or postponed. This interruption to business can cause a major loss of income for a short or extended period depending on the damage.

In the case of damage to property occupied by tenants, landlords face further loss of income if tenants are forced to move out due to property damage.

It is thus crucial that business owners take out business interruption insurance along with property insurance for businesses. This will ensure that you make provision for damage or loss of property and the consequent loss of income.

Business interruption insurance will ensure that company owners can still pay salaries to company employees, regardless of loss of profit.

Final Thoughts on Business Property Insurance

Business property insurance is crucial to safeguard a company against significant capital losses in cases of unexpected tragedy. Unanticipated damage or loss can stagnate or completely halt business operations and impact business profit.

Having business property insurance ensures that the company can claim money to replace or repair the damaged business property instead of paying out of pocket. It also ensures that you can still pay employees during unforeseen business interruptions.

Business personal property insurance is only one type of insurance policy that business owners should consider for their company. Additional business insurance such as liability insurance, vehicle insurance, and business interruption insurance should form part of your holistic risk management approach.

Have a look at our guide to the different types of business insurance policies to better understand what insurance your business may need. You may also want to read through our list of the top South African business insurance providers while you search for the best insurance quotes.