Risky Business
A Small Business Insurance Guide for Independent Insurance Agents and Brokers

Chapter 2: How Insurance Protects Your Agency
Part 2: Property Insurance for Agents: Safeguarding Your Physical Assets

Property Insurance covers the physical assets that help you run your business against loss or damage. Unless your business has deep pockets, it would probably be difficult to replace your business property if…

  • Your computer, cell phone, printer, and scanner are stolen out of your office in the night.
  • Your office is structurally damaged in a windstorm.
  • Your office's furnishings and fixtures are destroyed in a fire.

You'll notice that each of these events is outside your realm of control. You can't control human behavior or Mother Nature. But by carrying Property Insurance, you can at least reduce the amount of money you must pay out of pocket to restore your business property when these covered claims happen (fire, theft, and windstorms).

Standard Property Insurance policies cover business losses caused by fire, theft, and windstorms.

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Property Insurance FAQs for Stock Brokers and Insurance Agents

You can customize your Property coverage based on your business's exact needs and exposures. To help you decide which kind of policy is right for you, keep these questions in mind:

How much coverage do you need?

When it comes to purchasing Property Insurance, there are usually two types of plans to choose from: an Actual-Cash-Value policy or a Full-Replacement-Value policy. Actual-Cash-Value policies are, in general, easier on the wallet, but your insurance provider will only reimburse you for a percentage of your property's value. This percentage accounts for your property's depreciation. On the other hand, Full-Replacement-Value policies tend to be a bit more expensive, but they allow you to replace your damaged property with similar property at its current market price.

Do you own commercial real estate?

If you own commercial real estate, you'll want to make sure your Property Insurance policy provides coverage for both the building itself and the contents of the building. The "contents" of your building include office equipment, furniture, fixtures, and anything else you keep in your office. It's not uncommon for commercial real estate owners to think their policy insures their office's contents only to realize after tragedy strikes that these items aren't covered. Don't let that happen to you!

Do you live in an area prone to natural disasters?

Most Property Insurance coverage protects you from specific dangers, which are explicitly written out in your policy. These are known as "named perils." The most commonly included named perils are fire, theft, and wind damage. This means that you are protected if one of these three disasters should strike, but not if your city finds itself underwater, as New York City did after Hurricane Sandy.

To find out whether your business is at risk for natural disasters, check out the Insurance Institute for Business & Home Safety's Zip Code Risk Search. If you live in an area prone to flooding, hurricanes, or earthquakes, be sure to talk to your insurance agent about the endorsements you can add to your Property policy to account for these additional disasters.

Most Property Insurance policies don't cover flood, hurricane, or earthquake damage, but you can always add on an endorsement to cover these events.

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Do you rent property?

If you rent property or work in a brokerage house owned by someone else, Property Insurance may seem unnecessary. But if you own equipment housed in that rented space, you'll likely need a basic Property Insurance policy to protect those items. While someone else may be carrying an insurance policy to protect the building, your business equipment is likely excluded from that coverage.

Do you own a home-based business?

If you work from a home office, you may believe that your office equipment is covered by your homeowner's insurance. Unfortunately, typical homeowner's policies exclude coverage for business-related items. This means that if your work computer is stolen from your home, it's unlikely that your homeowner's policy will reimburse you for it. (To learn more about the limitations of your homeowner's policy, check out the infographic "Is Your Home-Based Business Covered?") Luckily, a basic Property Insurance policy can adequately protect your business assets.

Most homeowner's insurance policies exclude coverage for business assets.

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How to Save Money on Your Agency's Property Insurance Policy

By this point, you may be concerned that Property Insurance sounds expensive. But independent contractors can often get a competitive rate on their insurance policies. Some brokers and insurance agents may even qualify for a discounted insurance package called a Business Owner's Policy (BOP).

In order to qualify for a BOP, your business must be considered "low-risk" for General Liability and Property Insurance claims. If your business is classified as low-risk, then your insurance provider can bundle these two coverages together for a reduced premium. A BOP is a great way for independent contractors to save money and still have the coverage they need.

Low-risk businesses may be able to save money on their Property and General Liability policies by purchasing a Business Owner's Policy (BOP).

Key Insurance Policies for Stock Brokers and Insurance Agents

General Liability and Property Insurance may cover your basic risk exposures, but given your specialized services, you'll require additional coverage to adequately protect your business from other liabilities. Namely, providing services and offering advice to clients opens you up to professional negligence claims. And considering you often advise clients on how to invest their money or protect their assets, emotions can run high. In fact, your clients may be skeptical of the quality of your services from the start.

This skepticism may encourage clients to sue your business when something doesn't go as they hope. And when that happens, you'll need special coverage to help absorb the high cost of their claims.

Next: Part 3: Why Brokers & Agents Need Professional Liability Insurance

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