You may be relying less and less on hard copies of your valuable papers and records and transitioning to electronic filing instead. Even so, your hard copies still need to be protected in case you experience a catastrophic loss, like a fire or a natural disaster.
Although you may have some existing coverage for valuable papers with a personal property form or standard business owners policy, this coverage is fairly limited and may not be adequate to meet your needs.
This is where valuable papers and records coverage can help you rebuild your business after a loss. To put it into perspective, analyze your business needs, and see what it would cost to replace your records:
- Would you need to hire temporary employees to help replace the papers?
- How many hours of work would it take to replace the papers?
- Would you need to obtain original versions?
- Would you need to recreate original work, like home inspections, surveys, or maps?
If you consider the actual costs, you may realize you need more coverage than you currently have.
What is Considered a Valuable Paper?
Valuable papers are documents that are critical to your business and do not have duplicates. A policy may say it covers “written or printed documents, manuscripts and records,” which could include invoices, client lists, contracts, loan documents, and medical or employee records.
Valuable papers generally do not include money, data records, securities, and records stored electronically, so ensure you have additional coverage for those things.
Valuable Papers Coverage
The preferred method to insure valuable papers is to purchase valuable papers coverage and, if the value of your accounts receivable justifies it, purchasing accounts receivable insurance. If your business handles most accounts receivable payments electronically, accounts receivable insurance would not be necessary for you to consider.
Valuable papers insurance offers two types of coverage:
- A blanket limit of insurance is offered for valuable papers and records that can be replaced. The limit should be high enough to cover the research cost and replacement of the papers after sustaining the worst possible loss.
- Individual amounts of insurance are provided for items that cannot be replaced, like one-of-a-kind historical documents or first edition books. The amount of insurance provided reflects the appraised value of the item. Each item should be reappraised every two or three years to keep up with inflation and market conditions, and the insurance amounts should be adjusted accordingly.
Program of Records Protection
Establish a program of records protection at your business to ensure the safety of your valuable records. Analyze your exposure to potential losses like flood, fire, or theft, and protect your records accordingly.
This could mean storing all important records in fire- and theft-proof locked files when not in use or your business is closed. Return the records to storage promptly after you use them.
Give special protection to rare or irreplaceable books and documents. They may need protection from light, humidity, or insects.
You can also store copies of valuable papers in a second location and transfer them frequently. Be sure the second location is far enough away from your primary location to avoid the same loss or risk.