Asset Protection Business Insurance
Ideally a business owner would want an insurance policy.
- Asset protection insurance can open access to financing since it gives confidence to lenders that loan repayments for asset purchases can continue to be met should a risk event leading to damage occur or loss of the underlying asset that for which finance has been provided. In fact, lenders often require asset protection business insurance as a condition for granting loans for asset acquisition. Similarly, landlords may require the tenant to take out insurance cover that provides security to their property arising from the specific risks of the tenants business that may not be covered under the landlord’s own policies.
- Peace of mind.
Asset protection insurance provides cover in the event that business assets such as buildings, machinery, vehicles, office equipment and supplies, products, inventory, goods in transit, money and so on are damaged, stolen or lost through a catastrophic event such as fire, floods etc. There are many sources of risk to a business’ assets and therefore, it is worthwhile to understand the different types of risks that business assets may be subjected to and the likelihood of those risks occurring as well as to mitigate the impact of these risks through asset protection business insurance cover. There are high risk assets, assets at moderate risk and assets that fall into the low risk categories. The assets of a business represent a significant investment in the business and enable the business to keep its customers and make money. Therefore, it is of vital importance for the business to protect its income generating assets.
- Limited coverage. Like all insurance policies, asset protection business insurance policies have exclusions of what they will not cover under a general class of risks even though the risks may affect assets. For example, some policies may cover assets against loss arising from natural disasters and accidents but not from loss arising from negligence on the part of an employee or lawsuits against the business, in which case, separate liability insurance policies may be required.
- Limited payout. The amount that is paid out is set at a certain maximum amount which is usually below the value of the property lost.
- Slow response. Some insurers can take a considerable amount of time to settle claims as assessors are sent to investigate further and make a determination of how much should be paid out.
The cost of insurance premiums for asset protection business insurance cover depends on a number of factors such as:
- The number and value of assets being covered.
- The amount of cover required.
- The location and security of the assets.
- The types of threats and their likelihood.
- The number of previous claims.
- The number of employees.
- How long the business has been in operation.
- The insurer that has been selected.
A variation of asset protection business insurance is liability and insurance. The potential for accidents and therefore, liability is ever-present starting from the business’ own employees themselves as well as customers and other third parties. Injuries and unintended consequences of product consumption and services can bring lawsuits and claims against the business, as can failing to meet contract provisions, advertising liability cyber liability, professional liability, etc. These put business assets at risk of disposal to settle claims. Liability insurance cover typically costs from $500 to several thousand dollars per month depending on several variables that include, the number of employees, activities of the business, the potential for injuries, previous claims, the number and type of claims in the industry, etc. Prevention is the first and best line of defence against liability, the second is insurance and the third is protection through structural business arrangements. It is important not to trade and own all business assets under a single entity. It is advisable, depending on the size of the assets of the business and the potential for risk of lawsuits and claims, to structure a business in such a way that there are several different entities that own different assets that each offers to the other for nominal amounts. For example, Company A, may lease machinery from Company B and lease vehicles from Company C. while it owns only the office equipment that Company B and Company C, lease from it. This is in order to safe guard assets in the event that any one company is sued. Similarly Trusts can also be added to this structure with the view of increasing the strength of the protection.