Business contents cover is the least glamorous part of a commercial policy and the one most often bought with a guessed figure. The figure matters more than the wording, because the condition of average means a sum insured set too low reduces every claim, not only the large ones.
What counts as contents, and what does not
Contents normally means the furniture, equipment, fixtures and fittings a business owns or is responsible for, as distinct from stock, from the building itself and from property belonging to other people. Tenants improvements are a recurring grey area: a fit out paid for by the tenant often belongs to the tenant for insurance purposes while sitting physically inside the landlord's building, and neither policy picks it up unless somebody says so.
Reinstatement value, not what you paid
The sum insured should be the cost of replacing everything as new today, including delivery, installation and any professional fees, rather than the depreciated book value or the original invoice. Businesses that insure to book value are underinsured almost by definition, because accounting depreciation and replacement cost move in opposite directions over time. Equipment bought second hand is another trap, because the replacement is priced at whatever the market now charges.
Average, and the proportional cut
Commercial policies carry a condition of average. If the sum insured is half what the contents are worth, the insurer treats the business as having insured half the risk and pays half of any claim, including small ones. This is the mechanism that turns a mild underestimate into a permanent discount on every future claim, and it is why a rough revaluation every year or two is worth the hour it takes.
Away from the premises, and in transit
Contents cover is usually tied to the address on the schedule. Equipment taken to a client, to a site, to an exhibition or home with staff is often outside it unless an all risks or portable equipment extension is added. The same applies to items in transit between premises. Businesses that have become more mobile since the policy was written frequently carry the old geographic limit without realising it has stopped matching how they work.
Questions people ask about business content insurance
Should the sum insured be new replacement cost or current value?
Replacement as new today, including delivery and installation. Book value and original cost both understate it and trigger the condition of average.
What is the condition of average?
Where the sum insured is below the true value, the insurer reduces the claim payment in the same proportion. It applies to small claims as well as total losses.
Is equipment covered when staff take it off site?
Only with an all risks or portable equipment extension. Standard contents cover is tied to the premises named on the schedule.