Insuring property and expenses linked to business operation
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Insurance is an operation whereby, in exchange for payment of a premium, the insurer undertakes to compensate a person (business) for loss or damage caused by the occurrence of an insured risk or to provide a benefit covered by the policy.
The aim of property insurance is to cover material loss sustained by the insured. Example: a building destroyed in a fire.
Objective: insurance can cover buildings, furniture and professional equipment, merchandise, raw materials and vehicles.
Who is concerned
Available to the self-employed and any type of business, property insurance applies from the creation of the business and throughout its development. The different triggering elements for taking out property insurance are:
- the occupation of a building as owner or lessee;
- the purchase of a building;
- the conclusion of leases on equipment;
- investments in furniture and equipment;
- increasing the stock of merchandise and raw materials making insurance against theft or loss necessary;
- risky activities;
- bank financing of an investment for which the bank requires fire and damage insurance.
Prerequisites
Access criteria
Any natural person with the legal capacity to do so can take out an insurance policy. Legal persons can also take out an insurance policy provided that the commitments are entered into by duly authorised persons.
Information required by the insurer to make an insurance proposal
- nature of the risk to be insured;
- definition of the property covered by the insurance;
- maximum budget regarding the premium payable or the insured amount required.
Documentation or description of the business
- copy of the company’s articles of association;
- minutes of the general meeting indicating the persons that are duly authorised to bind the company;
- copy of the identity cards (or passports) of the persons that can bind the company.
How to proceed
Taking out the insurance
Risk to be covered
The risk to be covered is:
- a future event (it cannot already have taken place);
- an uncertain event (definite or indefinite, but the date thereof is unknown);
- outside of the insured party’s control (hence exclusion of intentional acts).
Benefits provided by the insurance company
In the event of the occurrence of the insured risk, the insurer may:
- pay a benefit which is set after the loss occurs;
- pay a lump sum which is determined when the policy is taken out;
- carry out a service in execution of the policy.
Obligations of the insured
The insured is required to:
- pay the premiums. Non-payment of premiums may result in the cancellation of the policy by the insurer;
- declare claims within the time frames for declaration specific to each type of insurance.
Costs
The cost of insurance is made up of the following elements:
- the premium (payable in advance) which constitutes the remuneration required by the insurer in exchange for its commitments. It should be enough to settle any claims;
- management and business expenses of the insurance company;
- expenses which represent a fixed fee per management service;
- taxes.
Duration and amount
The duration and amount insured differ from one insurance policy to another insofar as all insurance policies are tailored to the insured party's specific requirements.
Excess
To limit the cost of insurance, it may be wise to opt for contracts with excess.
Set-up times
The reviewing and processing times depend on the complexity, size and urgency of the case.
Types of property insurance
Buildings
- multi-risk insurance;
- vandalism cover extension;
- structural defect insurance (for new builds).
Furniture and equipment
- multi-risk insurance;
- vandalism cover extension;
- policy covering machinery breakdown and electrical damage;
- supplementary insurance if the computer equipment does not belong to the business.
Vehicles
- compulsory third-party liability motor insurance;
- additional cover against loss (accident, fire, broken glass, theft).
Receivables
- credit insurance;
- special insurance for foreign trade.
Accidental business interruption
business interruption insurance.
Advantages, disadvantages and risks
Advantages
- compensation if the insured risks materialise;
- protection of the business against unexpected expenses;
- continuation of the business’ activity even after a large material loss;
- supplements the creator’s protection in terms of social security/protection;
- creation of a climate of security for members of staff and the business manager.
Disadvantages
- costs can sometimes be high, increasing operating expenses;
- need to classify and quantify the risk correctly;
- need to regularly reassess the risks in order to adapt the insurance policies accordingly.
Risks
Legal or contractual exclusions which are not covered by insurance policies, hence the importance of carefully examining the general terms and conditions.
