The Hanover Insurance Group

Five signs your business property insurance needs have changed

Team of successful business people having a meeting

When you’re heads down running your business, you may not always spend the time you should to review your business insurance needs. In fact, a recent Hanover study found that only one in three small business owners believe they spend enough time assessing their insurance plans. 

Should the unexpected occur and there is a total loss, not having enough property insurance to rebuild could delay and even prevent you from reopening your business.

It’s time to talk to your insurance agent…

Steps you have taken to grow, modernize or renovate your business can impact how much insurance coverage you need. Here are five indications that it’s time to connect with your independent insurance agent to do a comprehensive review of your business property insurance needs.

In the last twelve to eighteen months, you have:

  1. Made property improvements or renovated your business space
  2. Purchased new machinery or equipment
  3. Made significant investments in technology or security
  4. Expanded or increased your product inventory
  5. Added shifts to your production schedules

Replacement value

Your business, just like your home, needs to be insured for what it would cost to fully replace and rebuild it. This insurance value or “property limit” should include the buildings themselves, as well as the content of the building, machinery, and landscaping – all tangible property. And, this value is not one to set and forget. “Businesses should expect that the cost to replace or rebuild their business property will go up some each year. Every three to five years, the cost could change dramatically due to the overall economy, inflation, labor and material costs, and regional trends. If your values aren’t keeping up with this, you run the risk of underinsuring your exposure. An annual review of your business insurance needs is necessary to help ensure the right protection is in place,” says Robert Brewer, The Hanover’s vice president of industry solutions.

Labor and material costs are on the rise

Every year since 2008, the costs of construction materials and labor have risen. That means each year the cost to rebuild your business goes up. According to the Turner Building Cost Index, overall commercial reconstruction costs rose approximately five percent from 2017 to 2018. That means, in the case of a total loss, if in 2017, it would have cost $800,000 to rebuild your business, today it could cost $840,000. If your insurance coverage does not reflect this increase, then you would need to pay the additional expenses out of pocket, or choose to reduce what you rebuild. Review our infographic for more information about how the rising cost of labor and construction materials affects how much property insurance you should carry.

Annual review

Consulting with your independent insurance agent on an annual basis can help ensure you have the best combination of coverage, limits, and deductibles to protect your business. The Hanover offers a complete suite of tailored insurance solutions to protect your business and give you the peace of mind to do what you do best.


LC July 2018-336