Business Property Insurance

The Writing on the Walls: Understanding How Your Business Is Covered

Most enterprises rely on their office space as a crucial part of their daily operations. Because of this, business property insurance is one of most important policies any business can hold whether their space is rented or owned outright.

Policies are typically written either on a replacement-cost or actual-cash-value (ACV) basis. Knowing how your insurance policy is written is crucial to ensuring your company can weather a major disaster because it will directly impact how you are reimbursed.

Replacement-Cost Versus ACV

Policies written on a replacement-cost basis will typically reimburse losses at a higher rate than actual-cash-value policies because a replacement-cost policy will pay out based on the current market value of your property. By contrast, an actual-cash-value policy pays out based on the value of your property at the time of the loss and considers depreciation. There may be pros and cons to each type of coverage for your business, and there are a variety of factors that may impact the type of coverage you need, including:

  • Your business’s location
  • The type of property
  • Your desired policy terms
  • Your budget for deductibles and co-insurance

Being aware of how your business property insurance policy is written will allow you to be as prepared as possible should you ever need to file a claim. While either policy type may work for your company, you should always be sure you understand all the details of your coverage.