Dependent Property Insurance

Tom WallaceProperty Insurance, Risk Management

dependent property insurance

Who do you depend on?

Production of a food or beverage product is labor intensive. It takes time regardless of who is manufacturing the product.

Production modes vary by company. Maybe you own your facility and equipment. Renting commercial kitchens has long been popular. Many cities now have incubator kitchens that offer many services beyond just equipment and storage.

However, copacker production, and its prevalence, makes a little known property coverage all that more important.

Property Insurance 101

Three categories of Property insurance:

  • Fixed location property (building and/or business property)
  • Property that moves around
  • Loss of business income and extra expenses

Another critical piece of information is the designated location of your business.

Designated location may be your mailing address but does not have to be. It is the designated location(s) that trigger property insurance.

For example, 123 Main Street, Anytown, USA is your designated location. It is listed in your policy as an insured address. Property located here and loss of the location resulting in a loss of business income can be insured. Your mailing address could be a completely different.

Case of the copacker dependent location

An example of location information should make dependent property coverage more clear. Here are the facts:

  • Company Office: 456 North Blvd, Big Town, USA
  • Copacker address: 37890 Industry Road, Middle Town, USA

When reviewing policy pages, the designated location is 456 North Blvd. Copacker location does not show at all.

Because you rely on the copacker for production you depend on the location.

Dependent Property Coverage Basics

In order for coverage to apply you need the following:

  • Property insurance at a designated location (office in our example)
  • Business Income/extra expense at a designated location OR
  • A generic coverage endorsement, added at a flat rate, that includes some amount of dependent property coverage

With coverage established the next critical piece of information is the nature of the loss. For example, a fire at your copacker renders the facility unusable for twelve weeks. You need product but can’t get it and the time frame is not long enough to get another copacker online. You lose orders and maybe distributor/retail accounts.

Fire is a common coverage in property insurance. As long as your property coverage, at 456 North Blvd, includes fire AND you have some amount of dependent property coverage, you can start the claim process. There may be a waiting period for coverage to begin, 24 to 72 hours is common but not uniform.

Change it up to further illustrate how this works. Middle Town, USA is located in California. An earthquake hits and your copacker goes down due to earthquake damage. Does your policy cover earthquake? If not, the dependent property loss will not be covered.

See what is happening here? Your policy needs to have dependent property coverage AND include the same “cause of loss” that occurred to the copacker.

Need Help?

If you have the basics they you can make good decisions. Above all, get some help from an agent or broker who can navigate the coverage.

Complications in property insurance far outweigh exclusions in a general liability policy. Property insurance pays you, General Liability protects you, big difference.