For many business owners, the largest single asset they possess is their building.  And if your building is damaged in a fire or tornado, you may not be able to afford major repairs or renovations. The solution is adequate property insurance written for the full insurable value of the building.

"Full value" is the total cost to rebuild your building from the ground up at today's costs. It's important to keep in mind the increasing cost of labor and materials. Could you realistically rebuild your current structure with the amount it's insured for? 

A typical policy will provide the replacement cost value for your building and the actual cash value for your business property. Replacement cost value is the amount that is necessary to replace or rebuild your building or repair damages with similar materials, without considering depreciation. Actual cost value, on the other hand, is the value of your property when it is damaged or destroyed. This amount is typically determined by subtracting the depreciation from the replacement cost value. 

Most property insurance policies include a coinsurance clause, which requires you, the policyholder, to share the cost of covered services up to a moderate percentage of the actual cash value of the property. This will allow you to receive full coverage for your losses. Should you decide to purchase inadequate coverage for your property, you may be obligated to pay a percentage of all losses, even if they are listed in the policy.

Some may argue that insuring to the full value is excessive since the odds of a loss seem unlikely. But what if you do have a total loss?

If you want to lower your premium, here are a few tips other than lowering your limits:

1. Have the insurance written to the full value and choose a higher deductible.
2. Agree to pay for smaller claims while maintaining coverage for bigger claims. Insurance is best for losses that will risk the survival of your business and finances.
3. First ensure the basic safety net is in place. Then you can determine how much you're willing to spend to expand your coverage from the "must haves" to the "nice additions".

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Information from Trusted Choice