If you own the building you’re working out of, it is in your best interest to insure it. If you’re a tenant renting space, you may be listed on your landlord’s insurance agreement. Even so, it’s probably a good idea to have your own renter’s insurance policy rather than worrying about whether your landlord is keeping his or hers up to date, and how much of your property it protects.
If you’re working out of your home, make sure your insurance agent knows it, because if it’s not noted in the policy that some of your personal property is part of your business, the policy may exclude it, either intentionally or unintentionally.
You’ll need to work with your insurance agent to determine what policy is going to work best for you. Ideally, when it comes to real property you should have enough coverage to handle replacing the building to meet your current needs. This may be easier said than done.
Putting together a policy where you’re paying the lowest possible premiums may not be in your best interest. If you value your building and personal property at less than their replacement cost in order to pay lower premiums, the insurance company will reimburse you based on the lower valuation, leaving you to make up the difference while trying to pull your business back together after a disaster.
Valuation of real property will increase over the years, so work with your agent to make sure you understand how the insurance company determines increased valuation and what that means to your premiums. Some companies use actual value adjustment, and others calculate value based on the inflation factor. The language of insurance coverage can be confusing. Work with your agent to know exactly how your assets are being valued.