While your insurance company will pay most of the costs if you suffer a loss covered under your policy, there’s usually a deductible, which is the amount it will not pay. Therefore, if your policy has a $1,000 deductible and you have $5,000 worth of damages, the first $1,000 will come from your pocket, with the remaining $4,000 coming from the insurance company.
A policy with a low premium will have a higher deductible, and vice versa. Depending on the risk involved, you can determine which option is better for your business. Sometimes it’s better to pay a higher premium and a lower deductible at the time of an incident or accident, when you may need to watch your money closely, as business operations may be slower or halted temporarily. Conversely, it may be better for your monthly cash flow if you pay a lower premium, although you then carry a greater risk and will have a higher deductible. Work with an insurance professional to determine which best meets your needs.
Property insurance deductibles can be determined either on an individual claims basis or an aggregate basis. Depending on how many claims you anticipate making, you can determine which is best for you. Smaller companies with few claims might find paying per claim to be advantageous, while a large company that files many claims in the course of a year could be better off with cumulative payments made on an aggregate basis.
There are also several ways in which you can recoup money for property damages. A “cash value” basis is an assessment of the actual cost to replace the lost or destroyed item (less depreciation). A replacement cost will replace or repair an item at the current cost. Therefore, if the item stolen was a specialty piece of equipment, which at the time cost $2,000, today it might cost $3,000. In that case, you’d receive $3,000 to replace it at its current value. However, replacement cost coverage is less common, and will have you paying higher premiums than you would for a cash value basis of payment.