The property that your business owners is naturally very important to it, and worth quite a lot of money, no less. That’s why you cannot afford to see it get damaged, destroyed or lost, but the fact is that you cannot prevent every instance of property damage. If something unexpected does occur, then you don’t want to face the expense of having to replace important property all on your own.
With the benefit of commercial property insurance, you have a way to afford the ramifications of property damage without having to dig into your own pockets. However, to get the maximum compensation from your policy, you will need to ensure that it offers you replacement cost value (RCV) coverage. Here’s why the extra investment in this more specific coverage can ensure you always get a maximum return on any property damage claim.
What is Replacement Cost Coverage?
All businesses need property insurance. It can help them cover items like:
- Buildings that the business owns
- Inventory & Stock
- Machinery & Equipment
- Certain personal property stored in the business.
Depending on your intended use and the location of these items, you might need specialty endorsements or inland marine insurance to provide the appropriate amounts of coverage. However, standard property insurance will make sure you have the foundational coverage you need to protect items at your company’s location against hazards like fires, severe weather, vandalism or theft.
Generally, property insurance will include a deductible, and most core plans pay based on items’ actual cash values (ACV). This is an item’s value at the time of an accident, which is its used value, rather than the value it held when it was brand new. Therefore, even if your policy covers a piece of damaged property, you still might not receive a full payout for the cost of a new item.
However, if you carry replacement cost property insurance, then your insurer will calculate your settlement based on the like-new value of an item that is similar to the one you lost. Therefore, you will receive a higher amount of compensation for a given loss. As a result, your business will face less of a personal financial burden for the damage your property sustained. You therefore will have an easier, more financially friendly way to recover from a problem that you could not have expected.
Still, replacement cost value coverage is not unlimited. Deductibles will still apply, and your property coverage will have a maximum limit that it will pay for your cumulative losses. It is imperative that you work with your agent to choose limits that will offer as much compensation as possible following a total loss of all your property. That way, you’ll never be surprised by the fact that your property insurance will only cover a fraction of your losses.
Also Read: Is Commercial Property Insurance Required?
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