Business Insurance Checklist

Following the tragedy of the September 11 terrorist attacks, some business issues that were formerly considered mundane—if at all—were suddenly cast in a new light. Business insurance was one of those issues, and although it's complex and sometimes ignored, it can make or break your business in a crisis.

We interviewed some insurance experts and asked what they thought were some of the critical mistakes of CEOs and business owners. The resulting 12-item list can help you make your business insurance decisions.

1. Be Prepared Before the Disaster

Joy Gander is a consultant with T.E. Brennan Company, a firm specializing in risk management and employee benefits. She says, "Know the costs of attaining and moving into a second site. Keep duplicate records off site, and make sure they' re current." In other words, prepare for the disaster before it happens. Update these files and keep them organized—this will make it easier for you to supply your insurance company with the proper documentation and get your claim paid in a timely manner.

2. Property Valuation

In the event of property damage, you need to know how you will be reimbursed. This will come in one of two ways: either by replacement cost valuation, or depreciated settlements. Depreciated settlements is the cost of replacing your property with the depreciation subtracted, and replacement cost is simply the market value of a replacement property—most of the experts believe that replacement cost is the best.

Regardless of which method is used, Gander says that making sure the property and contents are valued properly is critical. "A lot of people use financial statements to value their property, she says. "But this can often lead to very incorrect valuations." This is because properties are normally not the same value they were a few years ago, and many financial statements fail to assess the changes.

For example, if your property was worth $300,000 ten years ago, it's most likely worth much more now. Make sure your financial records reflect the changes in value your property goes through so you can receive the proper reimbursements.