Oil baron Paul Getty said, “if it appreciates we buy it, if it depreciates, we lease it”.
In business this still rings true to many folk. Some still insist on buying an asset outright even if it depreciates by the day (ie cars). Others know that there is a benefit in leasing an item of plant or equipment because you can a) be certain of your fixed cost for the item and b) you aren’t stuck with the paper loss if the item depreciates.
Nowadays, even post credit crunch, you can still lease anything from a laptop to 300 ft mechanical digger. Finance is available, but finance costs. You have already accepted that by leasing it, you do not own the item. But, what some people are not aware of is, that someone wants that asset insured. The leasing company, the rightful owners, want it covered to protect their investment.
So, they arrange a sort of umbrella business insurance policy. You will see, in the deepest, darkest depths of your lease agreement that they have saved you the trouble of insuring this and done it for you.
What they do not tell you is that the premium charged is not really what you would call competitive. You will more than likely have some sort of commercial insurance policy in place. This will cover your business assets and liabilities.
You can usually cover the item of plant on your own policy for roughly 60/70% of the cost. You need to get your insurance broker to phone a company called “lease and loan” insurance (details in your lease agreement) to confirm that you have this cover in place. Once they have done this, to the satisfaction of L&L, then you will no longer get charged the higher premium.
Even if they have been covering this for months, your broker can still get them to refund you if they can confirm that dual cover was/is in place.
Don’t pay for what you don’t need, in this day and age, every penny counts.