Commercial Property Insurance

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Commercial property insurance provides coverage to business owners to protect their property and its contents such as infrastructure, equipment, furniture, and any other existing physical assets. Moreover, it offers to repair or replace a variety of assets including business personal property, business income, marine equipment, cargo and third-party property that is in your custody. Also, according to the National Real Estate Investor study, Hurricane Irma is ranked as the fifth costliest storm in the U.S. history, which incurred $50 billion in property damage.  

In this article

What Is Commercial Property Insurance? 

Commercial property insurance helps to protect the business’s physical assets from perils such as fire, theft and natural disasters. On the other hand, catastrophes such as earthquakes, floods or hurricanes aren’t covered unless added to the policy. It is also a key coverage in business owners’ policy (BOP) insurance. Therefore, commercial property insurance offers tailored policies to help you meet the unique risks of being a business owner.  

Adding more, while specific coverage varies from policy to policy, there are no industry specific differences. However, commercial property insurance covers three types of coverages. Therefore, it also gives you the opportunity to select the level depending on the needs of your business.   

Basic form policy

The policy offers standard coverage for natural disasters, fire as well as theft.  

Broad form policy

The policy covers everything that comes under basic form policy. Additionally, the policy also provides protection from falling objects, water damage and collapsing structures. 

Special form policy

The policy provides coverage from everything except for the exclusions listed in the policy.

Virtually, all kinds of commercial property can be covered under this insurance policy, although it’s most often purchased to cover physical infrastructure. That being said, the intent of commercial property insurance is to pay for the restoration or maintenance of damaged, lost or stolen property so that businesses resume operations quickly.  

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What Does Commercial Property Insurance Cover?

Commercial property insurance is also a part of combined policy called commercial property and casualty insurance. Generally, commercial property and casualty policy is merged with other forms of insurance. Such as general liability insurance and is often available as a part of a business owners insurance policy. Furthermore, business owners insurance can also be considered a standalone policy. 

Commercial property insurance is not legally required but most lenders prefer business owners to have it. But there are a multitude of risks that your business might have to face in times of a catastrophic event. Therefore, commercial property insurance will act as a protection against a few of the risks, which are: 

1. Bankruptcy

There’s always a possibility to go bankrupt when operating businesses and can be an expensive loss for the company. As we know that sometimes restarting your business from scratch is impossible without insurance. 

2. Reputation

They say it takes many good deeds to build a good reputation, and only a bad one to lose it. So, not being able to help your clients in hard times and creating more issues can bring reputation harm to your company. According to the Insurance Journal, reputation harm is the most expensive claim for a small business. 

3. Legal trouble

Not being able to pay employees and vendors, defaulting on either loans or unable to reimburse customers will land you in legal trouble. So, why take risks?

4. Spoiled inventory

Replacing inventories can be costly, if your goods get stolen or damaged. Therefore, commercial property insurance provides companies coverage for these primary areas of loss: 

5. The building or office space

Commercial property insurance will pay for the repairs and replacements. For example, if there is damage to buildings and components permanently affixed to the infrastructure. 

6. Contents within the building

If there is any property damage within the building due to covered losses, the insurance policy will cover the damage. 

7. Other people’s property

Suppose you accidentally either misplace or damage your vendor’s or customer’s property that was left in your custody. Then in such situations, the insurance will help you pay for replacement or damages incurred. 

8. Signs and marquees

It covers any harm done due to any covered peril to the building, fixtures and free-standing marquees  

9. Loss of business incomes

Business interruption insurance will help replace lost profit up to the policy limit. Therefore, if the company has to close for temporary restoration BII will cover the loss.

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Some Standard Endorsements and Exclusions to Consider:

Depending on the company, the business owners will generally need additional coverage to secure their commercial property. That being said, some of the common endorsements are: 

Business ordinance coverage

Building ordinance coverage will cover the additional cost incurred when rebuilding or restructuring the company after a covered loss. 

Commercial umbrella insurance

Commercial umbrella insurance will help to add an extra layer of liability coverage. Therefore, added protection for you!

Business crime insurance

It helps you replace the property that was stolen by your employee or an outsider. Hence, nothing to fear losing! 

Inland marine insurance

It will cover the losses incurred of your supplies or property stolen while transporting from one location to the other. Moreover, no need to be worried while your supplies are on the road. 

Valuable paper coverage

It will protect valuable documents on an all-risk rather than a named peril basis.  

Spoilage coverage

It will reimburse cost for the inventory ruined in power outages.

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Business building insurance exclusions are:

War

Damage incurred due to terror attack, missiles or other machine of wars, will not be covered by the insurance policy.

Earthquake

All commercial property policies generally exclude earthquake damages. Therefore, you will need to contact an earthquake authority insurer to secure your building from earthquakes.

Certain smoke

The insurance policy does not cover smoke damages. Suppose the smoke was due to accidental occurrence from a factory or agricultural exposures. Therefore, the policy does not cover the damage.

Certain fire

Fire that is started from a place where fire is natural, such as the stove, commercial property insurance will not cover the damage. Also, fire insurance coverage includes damage caused by a fire that usually does not occur inside a building.

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Types of Insurance That Includes Commercial Property Insurance

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Commercial Property Insurance Rates

Willis Towers Watson reports a hike in the commercial insurance prices in 2020. There are multiple factors that determine the rate of commercial property insurance: 

Size of business premises

The cost is determined by the size of your business premises. Therefore, a smaller working space means lower insurance cost compared to a factory or a big office space.

Geography

Crime rates, land value and how prone a location is to natural disasters, determines the cost of the policy.Also, a report by the National Real Estate Investor shares, that natural calamities will significantly affect the rates of commercial property rates. Therefore, businesses located in areas futile to floods, wildfire, or hurricanes, should get coverage and minimize premiums.

Age of building

Old buildings are susceptible to more damage compared to new buildings.

Type of equipment

The cost to insure heavy industrial equipment will be expensive than lighter equipment.

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Age of equipment

If your equipment’s spare parts are old and scarce, then it means you will pay higher premiums.

Types of hazards covered

Named perils are comparatively cheaper than open perils.

Property valuation method

Replacement value coverage is likely to cost more than actual cash value.

Safety and security

If your company is close to flammable and hazardous materials, then the policy may differ from the rest.

Construction

New and upgraded HVAC systems and electric wiring mean lower insurance premiums.

Protection

Sprinkler system and alarms can reduce the insurance rates. 

There is no pre-determined rate that will apply for all the commercial property insurance premiums. Also, International Risk Management Institute states that the commercial property insurance rate will vary depending on the characteristics of the property (COPE) to be insured and the level of coverage.  

Get quotes from multiple carriers for your business quickly and protect your executives from liabilities today!.