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Commercial Property Insurance: Coverage and Cost

As you focus on running your company, the risk of property damage or loss can lurk around every corner. Fortunately, you can protect your business with commercial property insurance coverage, which may come as part of a broader business insurance package. This type of insurance policy can ensure that covered hazards like fire, hail storms, vandalism, or theft don’t leave you with a deep financial burden to cover out of pocket.
If you are considering obtaining commercial property insurance, there are a few questions that might be on your mind. What types of businesses need to carry commercial property insurance? What does the policy cover? How much does it cost? Read on for answers to these questions and more.

What Does a Commercial Property Insurance Policy Cover?

A basic commercial insurance policy generally covers perils that may cause the loss or damage of physical business assets, including buildings and their contents. However, coverage details usually vary from business to business and location to location. Your specific coverage needs should determine what perils and assets to include in your policy.
A business property insurance policy covers items/risks such as:

● The physical premises:

If the insured business building is damaged by fire or other covered natural disasters, this policy can help pay for its replacement.

● Contents inside your building:

Typically, these are the physical items you keep in your physical operating space. A policy for your office might include things like furniture, computers, and records. On the other hand, a warehouse policy may include tools and equipment. You can even cover your inventory if you operate a retail business.

● Outdoor assets:

Business fixtures and structures outside your building also require insurance protection against vandalism, fire damage, and other risks. Covered items may include your company sign and fence.

● Offsite business assets:

An extended insurance coverage may help pay for the replacement of business items, such as laptops, that are lost or stolen while in use off-premises.

● Business interruption:

When a covered disaster strikes, you may have to halt your business operations for a while. Fortunately, a commercial insurance policy can pay for the loss of business income and certain expenses incurred during a shutdown period.

Who Needs Commercial Property Insurance Coverage?

No matter what kind of business or industry you operate, coverage for damage or loss of property is essential when disaster strikes. Covered perils can strike all different types of industry, whether it’s retail, manufacturing, or service. Even if you operate a small business, events such as fire, wind, hail, or explosions can damage your property, cause significant financial loss, and hurt your bottom line.
A recent report indicated that natural peril losses in the U.S. amounted to $39.6 billion in 2019. Theft and vandalism can also impact your business no matter its location. These risks and events are unpredictable, which is why it’s important to always carry the right policy. You may want to get commercial property insurance coverage in business scenarios such as:
● You own or keep your work tools, equipment, or devices such as computers on the premises
● You have inventory, such as in a retail business
● You run a home office whose assets aren’t covered under your homeowner’s insurance policy
● You keep valuable papers and records in the office
● You’re a tenant renting an office that requires coverage

What Amount of Commercial Property Insurance Coverage Do You Need?

It’s important to get the right amount of business insurance to ensure that you can fully restore your business after a covered disaster strikes. Generally, the more comprehensive your coverage is, the less out of pocket money you may have to pay should an insured emergency happen.
Here are the factors most likely to impact your commercial property insurance coverage needs:

1. Value of Your Building

The value of the building itself will typically weigh heavily on the amount of coverage you require. Your insurer may work out a final figure based on one of the following factors:

● Replacement value:

This amount enables you to rebuild your damaged property from the ground up.

● Actual cash value (ACV):

This is the value of your physical store, office, or warehouse after depreciation. You’ll need to plan to use some out-of-pocket money to replace what you lost.

2. Contents Within Your Building

When considering how much coverage you might need, it is important to not only account for the building but also all the contents within your building. Think about all the physical possessions within and outside your business premises that you might lose if a covered event happens.

3. Extended coverage

Certain items and events are not always covered in a basic policy. You may need extra coverage for items such as:
● Documents, records, data, and currency
● Freight
● Damage due to flood, earthquake, or crime
● Machinery damage
To avoid coverage gaps, consider engaging your insurance broker for help conducting a thorough risk assessment.

What Isn’t Covered by Commercial Property Insurance?

Generally, commercial business insurance does not cover the following:
● Damage resulting from tenants using your commercial building
● Flood and earthquake damage
● Loss due to staff dishonesty
● Predictable loss, such as normal wear and tear

How Much Does Commercial Property Insurance Cost?

When calculating how much your specific policy will cost, your insurer will look at a few different factors.

1. Your Property’s COPE Attributes

You may pay less for a building with a superior framework made of fire-resistant materials. Installed fire protection and security systems can also lower your rates. Similarly, if your neighboring business operations increase your fire risk exposure, your rates may be higher.

2. Your Business Operations and Industry

Your type of business operations may have unique risks or risk levels that impact your rates. For example, manufacturing equipment costs more than retail inventory to insure against loss or damage.

3. Coverage Level and Amount

Extra coverage and endorsements for items such as earthquake damage and recreation of documents increase your rates. Also, you’ll pay a higher rate for a replacement cost policy than you would for an ACV option.

4. Business Location

Businesses located within or near geographies with a substantial risk of weather-related tragedies generally attract higher property insurance rates.
No matter what size of business you own, adding commercial property insurance coverage is essential to protect your assets. For help analyzing your coverage needs, call CF&P Insurance Brokers today at (925) 956-7700.

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