What is Business Personal Property (BPP) in Insurance?
Unlock clarity on Business Personal Property (BPP) in insurance. Grasp its role in commercial policies, ensuring your business assets are properly protected.
Business Personal Property (BPP) insurance is a type of commercial property coverage designed to protect a business’s moveable assets. This insurance helps safeguard the contents within a business’s physical location, covering the costs to repair or replace property and equipment in case of a covered loss. BPP insurance is essential for businesses that own tangible assets like furniture, equipment, or inventory.
What Business Personal Property Covers
Business Personal Property insurance covers tangible assets not part of the building structure but crucial for operations. This includes office furniture, desks, chairs, and filing cabinets. Computers, servers, network equipment, and other electronic devices are also covered. Manufacturing equipment, specialized tools, and machinery are included under BPP coverage.
Inventory, encompassing goods held for sale, raw materials, work-in-progress, and finished products, is protected by BPP. Leasehold improvements and betterments, which are permanent upgrades or alterations made by a tenant to a rented space, can be covered if the tenant paid for them. These improvements, such as new flooring or custom built-ins, are considered the business’s investment even if attached to the landlord’s property. Property belonging to others but in the business’s care, such as customer goods at a repair shop, can also be covered.
What is Not Covered as Business Personal Property
Certain items and perils are excluded from standard Business Personal Property insurance policies. Buildings are not covered under BPP, as they fall under a separate commercial property insurance section. Intangible assets, such as patents, copyrights, intellectual property rights, or digital assets, are excluded because they lack a physical form. Cash, money, and securities are not covered under a standard BPP policy.
Vehicles used for business purposes are excluded and require a separate commercial auto insurance policy. Property in transit or stored at off-site locations requires an inland marine insurance policy rather than BPP. Exclusions also include damage from natural disasters like floods and earthquakes, which require separate policies or endorsements. Damage from wear and tear, neglect, or pest infestations is not covered by BPP insurance.
Valuation and Coverage Considerations
When insuring Business Personal Property, businesses must consider how their assets will be valued for a claim payout: Actual Cash Value (ACV) versus Replacement Cost (RC). Actual Cash Value coverage reimburses the business for the current market value of the damaged or lost property, minus depreciation for age and wear and tear. This means the payout might not be sufficient to purchase a brand-new replacement, potentially leaving a financial gap. ACV policies have lower premiums due to this depreciation factor.
Replacement Cost coverage pays the cost to repair or replace damaged property with a new item of similar kind and quality, without deducting for depreciation. This ensures the business can replace its assets with new ones. While RC coverage results in higher premiums, it offers more comprehensive protection. Insurers pay the actual cash value first, then reimburse the difference to replacement cost upon submission of receipts for the new items.
Accurately assessing the total value of BPP is important to avoid underinsurance, which can lead to reduced payouts during a claim. Businesses should maintain a detailed inventory of their assets, including purchase dates and costs, to determine appropriate coverage limits. Regularly updating policy limits is advisable as the business acquires new equipment or as asset values change over time. Consulting with an insurance professional can help businesses select the most suitable valuation method and adequate coverage levels to protect their operations.