In some instances contents insurance can be compulsory – backers of your business may insist upon it. However contents insurance is not as widespread as you might think. Many businesses have no or little contents insurance, however some need it more than others. You need to evaluate the extent to which you would benefit from it.
First off, contents insurance will protect you from the following events:
- Severe weather – storms, lightning, floods
- Theft and vandalism
- Fire, smoke, explosions
- Burst pipes
- Civil commotion
- Water or oil leakages
- Impact on vehicles from falling trees
A proper contents policy will cover your business possessions for up to a certain amount, either as stated by you, or categorised by the insurance company. There are two main types of cover:
Old-for-new: items are replaced at their current market value
Indemnity cover: the insurance company will take into account general depreciation.
Be careful to check which type of cover the insurance company is proposing (obviously the former is a far better option). If you do purchase an old-for-new policy, make sure to value your contents at their replacement value, not at their actual value.
Some policies have special features. These can include built in legal expenses, cover for possessions in your vehicle, food spoilage in freezers, garage cover, outbuildings cover, etc. If you want to keep your insurance premium to a minimum, ask the insurer about leaving off special features, or try raising the excess. The policy will probably insist that you submit a contents list, with individual items over a certain value specifically priced. This varies with different insurance companies.
You need to evaluate how likely a certain event would be. Also, you need to ask yourself 'how much harm would it do to my business?'. If you find that the loss of your contents could seriously harm your company or even cause it to close, then an stronger insurance package would be advisable.