The pawn industry is alive and well, full of bright and forward thinking professionals as well as seasoned veterans who have seen it all, or at least know someone who has. Even with that much collective experience, the unexpected can and does happen. For nearly three decades, UL&C (PawnInsurance.com) has been providing comprehensive insurance to pawnbrokers nationwide. Through the years, we have seen a trend of pawnbrokers and their agents attempting to reduce their cost of insurance by not securing enough coverage for their Business Personal Property (furniture, fixtures, and equipment) and Tenant Improvements and Betterments (covering alterations made to the the physical building).
Pawnbrokers invest a lot of money into their Business Personal Property (commonly referred to as BPP), sometimes upwards of tens of thousands of dollars. Business Personal Property covers everything being used to operate the business; showcases, alarm and camera systems, safes, storage systems, computers and software, all the way down to the basic essentials like gold testing equipment, jewelry scales,the list goes on.
I'll openly admit, it's important to make sure that you are not “overpaying” for insurance, this is the last area where you want to try to cut corners. The premiums you pay for insurance are mostly for covering the pawned and owned inventory in your shop and overall liability. Have a quick conversation with any pawnbroker who has either suffered a complete loss or significant loss involving Business Personal Property they'll tell you, it adds up quickly. When considering what you need for coverage in your shop, try this little exercise; take a to walk around your store (inside and out) and imagine that in a worst case scenario situation, how much would it take to buy brand new everything that you use to operate my business. Just like you have a detailed inventory for the pawned and owned merchandise you're holding, it's wise to do the same for your Business Personal Property. Most policies are written on a replacement cost basis, so you need to make sure your insurance matches the true replacement cost.
Another area that should not be overlooked is Tenant Improvements and Betterments. Tenant Improvements and Betterments are permanent improvements to the building/parcel you lease, improvements that would not be able to be undone. We've seen improvements as varied as complete build outs with 100’s of thousands of dollars invested, all the way down to $50 alterations to a building. Regardless of the cost, it's important to make sure that you understand that Tenant Improvements and Betterments can and should be insured.
If you are not the owner of the building, or you are but under a separate entity, it's important to understand who invested the money on the improvements to make sure that you have the correct insurance policy. Here's an example; ABC Pawn, LLC operates a pawn shop in a leased building owned by ABC Properties, LLC. If damage occurs and ABC Pawn, LLC is the entity who invested in the Tenant Improvement and Betterments, if properly insured, their policy should provide coverage. We recommend that all businesses create an inventory of Tenant Improvements and Betterments in the event that there is a loss. There is nothing worse than dealing with a disaster and trying to figure out what you're going to do.
If you don't have coverage or don't know if you have enough coverage, it's not too late for you to gather information to make an educated decision to ensure sure you're covered. Take a few minutes, walk around your store inside and out, come up with Business Personal Property and Tenant Improvements and Betterments inventories to make sure you don’t come up short.
In a future blog, we will discuss blanket property limits which will include coverage for everything we discussed above as well as pawned and owned inventory items.