Your insurance may take care of storm-damaged stock, but is your real property sufficiently covered?

There is an old fable about a man who, while crossing a stream, hears a voice telling him to pick up stones from the stream and put them in his pocket. He bends over and picks up a few and goes on his way. At the end of his journey, he checks his pocket and the stones have turned into precious gems. At that point, he wishes he had picked up many more of the stones and loaded his pockets, but it is too late.

Many years ago, an insurance company used this as an analogy for consumers of insurance. When you buy insurance to protect your assets of production, it is usually not done with much pleasure and thought. But in times of disaster, the insurance policy turns out to be as much appreciated as those precious gems. In fact, customers usually find themselves thinking, “I should have purchased more insurance,” or “I wish I had covered that piece of property.”

Nurserymen are used to dealing with weather as respects their crop. When an electrical fire consumes a packing shed or a cooler full of stock, however, it seems to catch them off guard.

Insure your infrastructure

When making the buying decision on insurance for real or personal property that you use in your business, consider that one of the costliest mistakes is valuing the property incorrectly. Insurance can usually be purchased to protect the entire replacement cost of a building or contents including equipment. But what you carry the equipment for on your depreciation schedule will not replace the equipment when it’s damaged in a fire. When you get the insurance check for half of what it costs to replace the equipment, remember the pebbles in the stream: You were warned.

Some property can only be covered for actual cash value. This takes into account depreciation based upon useful life and age of the property. Very old equipment or equipment that can’t be replaced with “like kind and quality” may not be insurable for replacement cost.

Keep your policy up to date

Another mistake commonly made is failing to report new acquisitions of property or machinery. If there is a lien holder or a mortgagee on the new acquisition, it usually gets brought to the attention of the insurance agent because proof of insurance is required. There are times, however, when you might trade for a piece of equipment, acquire something as payment for goods or services, and/or you pay cash for the item. Many insurance policies are “scheduled policies,” which means that to be insured, an item must be shown on the policy. You cannot blame the agent if you fail to inform him or her and thus there is no coverage on the policy.

Emphasize loss control

The last area to address is actually the first in importance. No one likes to make an insurance claim. So if you’re an owner or manager – if you’re responsible for the property – make loss control part of your best practices. Work closely with your provider: An informed insurance agent can be very helpful in identifying hazards and implementing controls. Insurance companies offer special services at little to no additional cost over the premium. Controlling hazards to prevent losses takes some time and attention, but remember: The payoff is worth the effort.

A special note: Even taking care of business in all the areas I have addressed doesn’t assure that you will be protected against every loss. Those who had to endure Superstorm Sandy realize that the peril of flood is not covered under a standard insurance policy. An agent can place coverage through the National Flood Insurance plan for you, but flood and earthquake are two perils that are not usually covered in the standard policy and need special attention.

Ken Von Forell CPCU (Chartered Property Casualty Underwriter) is a Regional Sales Vice President for Hortica Insurance and Employee Benefits, and is a 37-year veteran of the commercial insurance industry. He can be reached at