Nonprofit Insurance Checklist: Business Personal Property & Business Income

Business Personal Property Insurance and Extra Expense

In this checklist post, we’ll look at the importance of covering your business personal property along with addressing the business income and extra expense coverage (if that phrase is foreign to you, sit tight… we’ll get there). For the checklist post about real property or building insurance, click here.

Business Personal Property

Identifying Your Stuff is a Key Piece of Your Insurance Planning

When you’re assessing your insurance coverage needs, you must review your stuff.

Your ‘stuff’ is your nonprofit’s property. Take a mental walk through your office or your buildings and identify the categories of items that you own.

You’ll have buildings and office equipment and furniture. You might have convention display material. You might have autos. You might have intangible stuff like data and online records and numbers that represent assets in bank accounts.

Your Business Personal Property is a particular category of your stuff. It includes (but is not limited to the following):

  • Office furnishings
  • Stock
  • Miscellaneous decorations and fixtures
  • Office supplies
  • Equipment

In essence, business personal property is most everything that is not a part of the building while still being tangible.

In other words, it’s not your cash assets (outside of a small limited amount), and it’s not your data. It consists of the things you see around your facilities that your employees and volunteers use to accomplish your nonprofit’s work.

Business personal property is also not your automobiles. Cars are nearly always covered under an auto policy of some sort.

How Should You Cover your Business Personal Property?

  1. First, identify what you have.
  2. Second, make your best educated guess as to how much money it would take to replace all of your business personal property in the event of a loss.
  3. Third, make that amount your limit of insurance.

An important note for nonprofits, especially small nonprofits. Even if you’ve received much of your property via donations, set your limit of insurance based on the cost to replace that property should you have to go to the store and buy it. If you have a loss, the last thing you’ll want to do is to beat up your donors for desks and chairs and whatnot. The cost for up to $50,000 is minimal in most cases. For smaller nonprofits, this should be a sufficient limit.

Business Income and Extra Expense

This piece of the property policy provides replacement for loss revenue or extra expenses incurred due to a covered property loss.

Business Income

If your nonprofit burns to the ground, and there is a revenue generating component (i.e. a thrift store), then this coverage would provide funds to replace the lost revenue while you find a new location or rebuild.

It also includes the normal operating expenses, including payroll.

Obviously, this business income coverage is extremely important for a wholesaler or a retail shop or a restaurant, but many nonprofits run small retail or other revenue generating operations in order to support other charitable work.  If your facility is in anyway tied to revenue generation, even if there is an obvious drop-off in donations due to your loss, then the coverage comes in handy.

Extra Expense

The second component – extra expense – would affect most nonprofits in the event of a property loss.

Extra expenses represents ‘necessary expenses you incur during the “period of restoration” that you would not have incurred had there been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss.’

Extra expenses include expenses needed to expedite return to business, to set up a new location or to let clients or other stakeholders know how to continue business with you while your building or property is restored (not an exhaustive list, of course).

How Do You Know If You Need This Coverage?

The unfortunate part of insurance is that it’s hard to determine sometimes whether or not you’ll need a coverage until a claim actually happens. Luckily, many carriers will include an endorsement (or a rider) to their standard policies that include some of this business income and extra expense coverage.

Discuss with your agent what your policy or quote proposal includes. Evaluate what your costs might be if a loss shuts your main facility or facilities down for a period of a year or even more.  There are worksheets available to help you make these calculations.

Feel free to contact me if you’d like one. Or simply google ‘Business Income Worksheet,’ and you’ll find something.

My gut feeling is that you need this coverage, especially if you’re a well-established nonprofit. The extra expenses can mount in the event of a loss. And the premium is relatively low.

Final Evaluation

As you consider your operation…

  1. Do you have business personal property?
  2. Would you incur extra expense or loss of income if you had a covered property claim at your facility or office?

If you could answer yes, then you’d be well served to have these lines of coverage included in your insurance plan.

As always, discuss your particular circumstances with your insurance professional. If you would like to contact me regarding your nonprofit’s insurance needs, feel free to reach out via the request for additional information or by signing up for my email newsletter

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