How to most effectively purchase property insurance for your business

This article was originally published on LinkedIn by Daniel Whallon, CLCS.

Two-thirds of this country are underinsured from a property standpoint. Two thirds. Now more than ever it is vital that you review what your business has in place. Many businessowners own the buildings they operate out of. Did you know you can most likely combine entities if there is common ownership?

Let’s say you run an ABA company under a corporation and you pay rents to your trust or other entity that owns the building. Most owners do not realize that you do not need multiple property policies to cover each entity. The best structure is as follows:

  • List the ABA company and the entity that owns the building as named insured’s
  • Insure the building for 100% replacement cost
  • Insure the contents for 100% replacement cost
  • Include 18-24 months of lost rents for the building owner AND 18-24 months of lost income for the ABA company
  • Try to get agreed value and if you can avoid co-insurance, do it

A key term to remember if you own multiple properties is blanket. Again, if there is common majority ownership, you can blanket all your properties together under one policy. This almost always eliminates any possibility of being underinsured. For example:

  • You own one building in CA insured for $1M, one in TX for $1M, and one in AZ for $1M- all under the same entity OR different entities that share majority ownership
  • You list all the locations and entities on the same policy and include a blanket limit of $3M. Now, if there is a loss at any location you have a per occurrence limit of $3M and underinsurance is eliminated

Hopefully these tools will be helpful for you and your business. They should help you drive costs down, save you time on renewals by reducing the number of policies, and eliminate the possibility of underinsurance.