Property and Equipment

Property coverage protects your physical assets that are in a fixed location and do not leave the scheduled location (typically extended to within 100 feet of the designated premises).  Equipment coverage (Inland Marine) is primarily intended to protect physical assets that are more mobile in nature and relatively easy to move from one location to another.

1. Property (personal property, tools, equipment and electronics) used by you in your business must be owned by the named insured on the declaration page in order to be covered.  Property owned personally is not covered by your business policy.

2. The best way to document property or equipment values is to have video evidence.  A camcorder or digital camera should be used and the tape/disc should then be stored off premises.

3. Property is generally insured on a replacement cost basis (new for old) while equipment is insured on an actual cash value or ACV basis (depreciated value).

4. Contractors who lease a building and make improvements to that property need to review their lease to know who insures the improvements.  If it is the landlord, documentation should be provided so the landlord can increase his coverage accordingly.  Most common however is that the tenant is required to insure their improvements.  This is called “Improvements and Betterments coverage” and must be specifically added.  Contents coverage does not extend to assets that are considered a permanent part of a building.

5. A common misconception in Property insurance is that in the event of a loss you will receive whatever amount of coverage was purchased.  There are two specific issues with that.  First is if you choose not to rebuild or replace the damaged property, your policy reverts to ACV.  The second is co-insurance. If you fail to insure the property to the proper value, a coinsurance penalty may reduce your settlement.

6. Another common issue in property and inland marine insurance coverage is leased and rented property and/or equipment.  Property coverage for leased items such as copiers, phones, and other electronic equipment is covered for ACV unless the property policy is specifically endorsed to reflect the lessor’s interest.  Inland Marine does not automatically cover short term leased or rented equipment unless specifically listed (scheduled) on your policy.

7. Since Inland Marine is covered on an ACV basis, the carrier will pay the lesser of ACV or the amount of insurance carried.  As such, annual reviews of equipment values should be conducted.  Equipment that is maintained in better than average condition should have clear documentation or an appraisal to support this assertion.

8. Individual scheduling of smaller tools should be done based on the limit set by your carrier.   Miscellaneous tools under $X amount (typically $500 or $1,000) should be covered on a blanket basis.

9. Covering computer equipment separately under an inland marine policy should be considered by any contractor located in a flood prone area.  A policy for backing up the system should be established with a provision to store back ups off premises.

10. Laptops must usually be scheduled separately to be covered.

11. A commonly overlooked coverage for contractors is extra expense. This provides financial assistance for extra costs associated with relocation/re-establishment of your office and/or storage facilities in the event of a covered loss.

12. Another commonly overlooked coverage is valuable papers.  This allows for the cost to duplicate or recreate valuable papers (plans/blue prints) in the event of a covered loss.

13. A final important coverage that should always be considered is employee dishonesty.  This protects you from dishonest acts by or on behalf of an employee.  It can insure against a range of acts that cause financial harm to your business from theft of property to the embezzlement of funds.  This coverage may be written to insure all employees or just those you designate (such as project managers with check signature authority or you office manager/bookkeeper).