Chapter 2: Building Your Business Protection Blueprint
Part 1: Basic Insurance Needs for Independent Architecture, Engineering, and Design Contractors
Property Insurance: Insuring Your Engineering, Architecture, Drafting, and Design Business's Assets
As a freelance design consultant or independent contractor in a design field, you rely on your business property (such as your workspace and equipment) to run your practice. But owning business property means that your investment is vulnerable to loss or damage. For instance, your commercial premises and gear could be…
- Vandalized or stolen.
- Damaged in a fire.
- Destroyed or lost during a severe windstorm.
- Fried by a power surge.
Property Insurance helps solo practitioners prevent monetary losses that accompany property loss or damage. Following any of the incidents listed above, a standard Property Insurance plan can cover the cost of replacing and repairing your items and commercial premises.
To sort out your coverage needs, consider the following:
Property Insurance Protects Your Real Estate
If you own an office, you have substantial incentive to protect your investment, and Property Insurance can do just that. This policy insures your building and the contents inside it. "Contents" refers to property such as computers, furnishings, fixtures, and other equipment. Keep in mind that your policy only protects you from specific threats (called "named perils").
Typically, Property policies cover damages caused by windstorms, fire, theft, and power surges. If you live in an area prone to hurricanes, flooding, and earthquakes, be aware that your standard policy won't cover these events. You can tailor your policy with the appropriate endorsements, though.
Property Insurance Fills Gaps in Your Homeowner's Policy
Don't make the mistake of assuming that your business property is covered by your Homeowner's Insurance policy. Most Homeowner's policies exclude coverage for business items — even computers! Fortunately, you can get a basic Commercial Property policy to fill this gap.
For example, say you're a freelance engineering consultant, and you keep an office in the basement. In two days, a severe bout of thunderstorms drops the same amount of rain your area usually sees in a year! Your basement floods, and your computer equipment is destroyed by water. Good thing you bought a Commercial Property Insurance policy with a flood rider!
Property Insurance Safeguards Your Rental Property's Contents
Again, don't be fooled into thinking that your landlord's Property policy will protect the contents of your rented office. While the structure itself is probably covered, your lease agreement likely excludes your business's property (be sure to check your contract!). Fortunately for renters, Property Insurance policies can be adjusted to cover only your building's contents, including your computers, furniture, office equipment, and fixtures.
For example, say you rent a small office downtown for your architecture business. In the middle of the night, a neighboring office space catches fire, which spreads to your office before firefighters can put it out. All of your office furnishings are destroyed, but luckily, your Property Insurance policy compensates you for your insured items.
Standard Property Insurance policies don't include coverage for flood, earthquake, or hurricane damage.
Why Your Business Needs Property Coverage to Thrive
Property Insurance isn't an insurance policy successful small businesses can forgo these days, especially when you consider the fact that the severity and frequency of property-damaging storms continues to climb. According to "The Most Costly Insured Losses in 2012," by Insurance Journal, nine of the ten most costly "insured loss events" occurred in the United States in 2012.
Small-business owners like you usually suffer the greatest losses when hit by one of these storms. According to "Climate Change Preparedness and the Small Business Sector [PDF]," a report issued by the American Sustainable Business Council and the Small Business Majority, microbusinesses have more to lose.
According to the report, 90 percent of a small business's clients come from within a two-mile radius. If a storm were to hit your town, you'll have to wait even longer to get clients through the door again.
The fact is that microbusinesses don't have the means to rebuild as quickly as bigger businesses. The report states, "Of the 60,000 to 100,000 small businesses negatively affected by Hurricane Sandy, up to 30 percent are estimated to have failed as a direct result of the storm."
Don't let this happen to you! Property Insurance tends to be affordable for contractors and consultants. You may even qualify for an insurance package called a Business Owner's Policy (BOP). If you have a low risk profile, your insurer might allow you to purchase a BOP, which bundles General Liability and Property Insurance together at a lower annual rate.
You can also add Business Interruption Insurance to your BOP or standalone Property plan. This coverage compensates you for lost revenue when a covered property event forces your business to temporarily close. For more information, check out our video about Business Interruption Insurance.
9 of the 10
most costly insured loss events happened in the U.S. in 2012.
of a small business's clients come from within a 2-mile radius.
of businesses hit by Hurricane Sandy failed.
NEXT: Health Insurance and ACA Considerations for Independent Architecture, Engineering, and Design Contractors