Valuable papers insurance is a type of insurance policy that insures an organization’s valuable documents such as corporate charters, trust, and share certificates from a specific peril. Such documents are usually important to the business or the owners because they possess monetary value.
Businesses can purchase the valuable papers insurance to protect the documents so that if they are lost or destroyed by a fire or other peril, the owners can be reimbursed for the cost of replacing such valuable papers.
Some of the papers can be replaced or restored, while other documents can be expensive or difficult to replace. If the insured event occurs, the policyholder is compensated for the monetary value of the valuable papers, or their replacement value.
However, the valuable papers insurance is limited to a certain value, and the documents must always be properly stored for a policyholder to file a claim.
Valuable papers insurance protects an organization’s valuable papers, such as share certificates, mortgages, deeds, trusts, and corporate charters.
The policy compensates the policyholder for the cost it takes to replace lost or damaged records.
The insurance is often purchased by small businesses, large corporations, and wealthy individuals.
How Valuable Papers Insurance Works
The main components of valuable papers insurance vary from one policy to another. Typically, most insurers define valuable papers as written, printed, or inscribed documents such as drawings, deeds, certificates, mortgages, medical records, business licenses, building leases, etc.
The policy does not cover electronically-stored records. In the modern age, the majority of organizations store their documents electronically, but paper records are still prevalent in most organizations.
Companies in the healthcare and real estate industries are still required to store patient records and building plans, respectively, in paper records. Such records are susceptible to being damaged or destroyed, and therefore, require additional insurance coverage.
If a fire destroys the medical records of patients, it can threaten the survival of the business if the destroyed information cannot be retrieved.
Although standard commercial property insurance policy may provide some coverage for valuable documents, it will not be adequate to compensate for the monetary value of valuable documents.
Valuable papers insurance is specifically designed to protect businesses from the complex process of replacing damaged or lost valuable paper records. It compensates policyholders for the cost it would take to replace the papers or at their monetary value.
For example, assume that fire causes extensive damage in ABC’s building, destroying the client’s records and the building plan for the upcoming project.
To restore the documents, the company would need to hire contract employees for two months to recreate the client records and hire an architect to redraw the plan. The valuable papers insurance policy should cover the cost of recreating the damaged records.
Documents Covered in Valuable Papers Insurance
Valuable papers insurance compensates the policyholder up to the cost of replacing or restoring lost valuable records and papers. In such a case, valuable records and papers include written, printed, or inscribed materials – except money, securities, data records, and data stored electronically.
Some of the valuable papers that are covered include books, maps, films, drawings, manuscripts, licenses, accounting lenders, mortgages, deeds, medical records, employee records, employee lists and files, legal papers, business permits, contracts, loan documents, etc.
Regardless of whether or not a policyholder made duplicates for the damaged papers, the insurance should cover the cost to replace them. For example, if the employee records are damaged, the company can reconstruct the record by manually entering the employees’ records or using other undamaged records that contain employee information.
The cost of buying materials to record the employee details and the cost of hiring temporary staff to recreate the records should be covered by the insurance. Valuable papers insurance compensates policyholders for the time and effort spent in re-creating the lost documents since most valuable papers cannot be replaced.
Most insurers do not provide all-risk coverage. They only compensate the policyholder when an insured peril occurs. Examples of perils that insurers cover include fire, explosion, hailstorms, floods, and building collapse.
What is Not Covered by Valuable Paper Insurance?
Most valuable paper policies do not cover valuable data that are stored electronically. Although most organizations have leveraged technology to store their data in electronic format, most property policies provide little to no coverage for damaged or stolen electronic data.
However, businesses can purchase a separate policy known as electronic data processing coverage to protect against the financial risk of losing data stored electronically.
Even with an option to store data electronically, some documents are required to be stored in their original state. Documents like mortgages and deeds require safe storage in their physical form. If the documents are lost, it will be expensive to replace them.
Therefore, businesses should take steps to protect their valuable documents from natural disasters, theft, and other unexpected perils that may affect the business.
With valuable papers insurance, businesses are protected against the risk of losing or damaging the papers. Insurers require businesses to guard these documents by putting them in a safe or vault as an extra layer of safety before they can be compensated when the insured peril occurs.