Assessing your small business' property loss exposure

We have discussed liability exposure identification in a previous post and now might be a good time to discuss the assessment of your business' property loss exposure. The first step in this process would be to identify and categorize the business property that would potentially be subject to a loss. You would further break this down into real property, such as land and all permanent structures attached to it, such as buildings, and the other category, personal property, which would be all other property not classified under real property. This would include money and securities, inventory, furniture, equipment and supplies, to name a few. One way to approach this task is to draw up a list of all real property, it's current value, how the value was arrived at and what would it cost in today's dollars to return that property to it's current state in the event of a loss. This is a list that should be updated on an annual basis since the value of land and buildings does not remain static and tends to change frequently. The other list should be a listing of all inventory, supplies, etc. This list should also be updated frequently since these items, specifically levels and values of inventory and supplies change on a regular basis. In insurance contracts it's important to know how your property is valued, either on a Replacement Cost basis or on an Actual Cash Value basis. Knowing and understanding both valuations is vital to coming up with the necessary values for your property. You aren't going to know all there is about your insurance contracts, that's why it's a good idea to ask your agent to explain specifics to you, specifically terms like Replacement Cost and Actual Cash Value.