Commercial property insurance
Commercial property insurance—often called business property insurance—provides protection against damages from fires, theft, some natural disasters, and other hazards. It covers commercial property similar to the way home insurance protects homeowners.
Whether you own, rent, or lease your office space, or even if you work from home, it can cover damages incurred to your small business. Homeowners’ insurance often won’t cover office equipment in the home, which is why you need business personal property insurance.
What Does Commercial Property Insurance Cover?
Property insurance protects physical assets from damages caused by fires, storms, and theft. You may need additional coverage for property that isn’t attached to your building (like vehicles, outdoor fences, or signs). Your agent can help you create a policy that will cover everything you need.
Not including the building, Commercial Property Insurance covers:
- Important documents
- Inventory
- Computers
- Equipment
- Satellite dishes
- Furniture
Loss of income and cost of construction to rebuild destroyed property is also usually included.
Commercial Property
Insurance Exclusions
Often, small business owners mistakenly believe their property insurance will cover damage to their building from a natural disaster. While your policy will cover a loss from a more common risk like an accident, theft, fire, or vandalism, it may not cover damage caused by natural disasters like flooding. If you live and work in an area that is prone to unique perils like flooding or earthquakes, you should consider adding specific hazard insurance to your policy.
Additionally, damage from a terrorist attack isn’t covered under a normal policy. Under the Terrorism Risk Insurance Act of 2002, businesses must purchase additional terrorism coverage to protect against losses due to terrorist attacks.
Finally, normal wear and tear, as well as willful damage or negligence to your building caused by you or an employee, would also be excluded.
The Two Types of Coverage
Direct Damage:
Direct damage covers the physical loss of property or physical damage to property. A commercial property insurance policy usually covers the replacement or rebuilding of property. Optional coverage includes debris removal and cleanup after a covered event. Direct damage coverage allows you to add, remove, or adjust coverages as the need arises.
Time Element Coverages:
With time element coverages, the losses your business incurs due to an incident are directly tied to repair and recovery time. The longer the repairs to your business take, the more your losses grow. Time element coverage is generally paired with direct damage coverage.
Replacement Cost VsActual Cash Value
Which is the best choice for your business?
- Actual Cash Value (ACV): This covers the cost of lost items, but subtracts depreciation. The value paid to you is almost certainly lower than what you paid for the items because they have lost value over time. This is the less expensive of the two options.
- Replacement Cost Value: This covers the amount necessary to completely replace damaged or destroyed property. Because it essentially replaces lost older property with brand new items, it is the more expensive policy. If you have expensive business assets, this may be the better coverage option.
A licensed insurance agent can help you decide whether the higher premium is worth the difference for your particular businesses situation.
Examples ofCovered Claims
Here are some examples to help you visualize what Commercial Property Insurance can do for you:
Your California-based small business is lost to a wildfire during a particularly dry season. Your insurance company will cover the cost of rebuilding the property, income lost during the time period of rebuilding, and any equipment that was destroyed in the fire.
You arrive at your small business to find the door kicked-in. As you call the police, you look inside and survey the damage. All of your computers have been stolen. If you chose replacement cost value under your property insurance, your insurance company will replace the broken door and computers with brand-new models.
During a rough spring, a nearby tornado throws a tree into your building, crushing the roof and smashing through a wall. Your insurance company will cover the cost of repair to your commercial property, inside and out.
Consider a Business Owner’s Policy
A business owners policy (often shortened to BOP or referred to as business income and extra expense) covers property that’s on-site. A BOP combines general liability insurance with property insurance, so your business will be covered from any claims related to property damage, bodily injury, and personal injury. Because a BOP covers more than just property insurance, it can be a good foundation for your insurance needs while still being more affordable than purchasing each policy separately.
Other Insurance Policies to Consider to Protect Your Business
Here are some other policies to consider:
Business Interruption Insurance:
This covers any income that your business loses that’s directly tied to your company being forced to close for a time because of physical property damage for a covered incident.
Leasehold Interest Coverage:
This protects you by covering any financial loss you incur due to your lease being canceled because of physical damage or loss of commercial property.
This type of insurance helps covers your business if your furnace breaks down, the A/C in the building stops working, or an electrical surge causes damage to computers.
What To Look For in Property Insurance
Because there are so many insurance polices that cover any combination of risks, the key to building the plan that’s right for your business is getting complete coverage without accidentally paying for a redundant policy. Your agent will go through your particular situation to help determine what coverage you need for the most likely risks. After comparing premiums, coverage, deductibles, and risk factors, you’ll want to choose the most coverage for the most affordable price. Commercial property insurance offers a variety of different options. It doesn’t matter if you are insuring a building, assets, or the entire business property; your agent can work with you to find the right combination of coverage for your situation.
Commercial Property Insurance Cost
Your cost will depend heavily on your type of business, the value of your property and assets, and how much coverage you want. Costs can range from several hundred to several thousand dollars a year.
What Impacts the Cost of Your Commercial Property Insurance?
When calculating your commercial property insurance cost, you’ll need to consider these factors:
- Location
- Property size
- Building age
- Physical asset worth
- Coverage limits and deductibles chosen
Our knowledgeable agents can help you with these factors, as well as state regulatory costs, to help you get the coverage you need.
Get a Commercial Property Insurance Quote
Our trained agents can help get you insurance quotes and set you up with the insurance company that best meets your needs. Fill in the form at the top of the page or call us at 800-433-5353. We’re excited to help you find the best fit for your business at a price you can afford.
Related Articles: Commercial Property & Casualty Insurance | Business Owners Policy