Sometimes knowing what you do not have is just as important as knowing what you do have.  When it comes to small business insurance not all damage to your property is covered.  There are three methods of covering property: Special, Broad, and Basic.  Most commercial business owners policies or common property policies are covered on a Special Form basis.  Special form policies state that the property is covered for all causes of loss except for those specifically excluded from the policy.  Here is where it is important to know what you do not have.

Most special form policies will exclude:

Earth movement and water- Earth movement encompasses earthquakes, landslides, and volcanic eruption.  Water damage includes flooding, seeping of surface water, backup of sewers and drains.  Both of these are excluded unless the damage results in fire or explosion. Both can be added back into the policy by having limits shown on the declaration policy, or if you are in a geographic area where these hazards are more frequent, by a separate policy.  Other catastrophic or extraordinary events not usually covered include war, nuclear event, ordinance or law/seizure (i.e. government mandated damage to property). Due to catastrophic weather events becoming both more frequent and severe, we recommend that all building owners purchase or endorse their property policies with earth movement and water coverages.

Off-Premises Service- Off-Premises Service is generally your utility services.  If the original cause of your loss is the damage to or loss of utility services, then coverage may be excluded even if it is related to a covered weather event like windstorm or hail.  We recommend that restaurant insurance policy holders and retail small businesses endorse the policy with this coverage.  Without the coverage you are exposed for both the loss of inventory and being closed for an extended period of time.

Wear & Tear- Just the general wearing of your equipment is not a covered loss.  The reason, there is no risk of loss, everything suffers wear and tear, that is a certainty.  Similar to wear and tear are leakage and seepage from appliance, rusting, scratching, shrinking, nesting or infestation by animal or insect.  Equipment warranties are a much better way of dealing with this property damage or loss.

False Pretense- if you voluntarily give away property due to a trick, you can not recover for this loss unless you have added the coverage back in through endorsement.  We recommend this coverage for non-profits, online retailers, small businesses with large shipping operations or global operations.

Each special form property normally has at least 20 exclusions.  The exclusions listed here are those that I find most small businesses are surprised to know about.  Be sure to go over the exclusions on your policy at least once with your agent.
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