What Is Valuable Papers Insurance?

Valuable papers insurance is a special type of property-casualty insurance. Valuable papers insurance reimburses the policyholder for the monetary value of any valuable papers such as wills, trusts, or corporate charters that are lost for any reason, though it cannot actually replace these papers. It is often purchased by corporations, small businesses, and wealthy people.

Understanding Valuable Papers Insurance

Valuable papers insurance protects businesses from the expensive and often time-consuming process of replacing important documents. The coverage limits for valuable papers insurance can be very high in some cases. However, the coverage is always limited to either the actual monetary value of the papers themselves or their replacement value. Furthermore, the papers insured must always be carefully guarded in order to file a claim. For example, let's say a company's headquarters is destroyed in a flood. The company's property deeds, documents related to a court case the company was once involved in, as well as information related to personnel and other important papers were all destroyed in the flood. This company has valuable papers insurance, so it files a claim and is reimbursed for these documents, thus saving the company money as well as time and effort involved in reconstructing the evidence from the court case. Medical and legal records are often the toughest to reproduce, as well as documents related to research and development.

If a business's commercial property policy does not include valuable papers, those items can be insured with an endorsement, which generally provides the same, or in some cases broader, coverage than what is included in a typical property-casualty insurance policy.

What Is and Isn't Covered

Valuable papers policies are used for businesses that rely on highly sensitive documents, such as medical records, contracts, accounting data, or blueprints. Since these documents may be essential to a company's business operations, a valuable papers policy can offset the losses if they are damaged or lost.

Most insurance policies for valuable papers specifically exclude documents stored electronically. Even though many businesses keep a wealth of important records in electronic form, few property policies provide coverage for damage to electronic data. However, businesses can protect this information with coverage specifically for electronic documents. Money and securities are also excluded.

Mitigating the Risk of Loss

Most policies will state the conditions of coverage for valuable papers. For example, an insurance company might require a company to store their essential records in a safe, behind locked doors, or beneath a chemical extinguishing system. If a company manager forgets to store papers safely, the accidental destruction of those papers may not be covered by their insurance policy. Insurers may also require important information to be regularly backed up and archived, creating duplicates of the most essential records. If records are backed up electronically, they must be stored with the same care and precision as paper records.