Insurance Terminology: Valuable Papers

I recently had a meeting with a client of mine who reviewed the wordings of his business insurance policy and had questions. It is fantastic that he took the initiative and reviewed the wordings – they are long and boring, but there is a lot of information in there that is important for your business.

One of the items that he reviewed is a coverage called Valuable Papers. The coverage is meant to protect you, the insured from the loss of documents such as client records, accounting records etc. In my client’s case, the question arose whether or not this coverage extended to his client’s documents – since he is in the document storage business.

The typical wording applies only to property that is owned or held by the insured entity, and only to property that that entity has some kind of interest in. For example: my client files would be covered for me and architect’s drawings for the deluxe uber-office that I would like to have, would not since they are owned by someone else.

The funny thing about the coverage comes down to the fact that physically, the papers are not worth all that much ($30-$50 a case?). What really then, is the value of those documents? They have virtual value as opposed to actual value – which can pose a real problem for you. How can you recover those documents if they burn up?

Cold storage is a solution that comes to mind (especially since that is what this particular client does). You will have to understand that the documents that you store at a storage facility will not be covered by their policy (unless they choose to accept responsibility for it.) You will have to insure the papers as property away from your premises and put a value to it.

While you are backing up these hard copies, a digital copy might be a good idea for further protecting those files (Even though it may be a grand endeavor to make said electronic copies)

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