Any commercial property can be covered by commercial property insurance. Commercial property insurance protects commercial property from risks like fire, theft, and natural disaster.
Commercial property insurance is carried out by various firms, including manufacturers, retailers, service-oriented businesses, and non-profit organizations. It is frequently combined with other types of insurance, such as commercial general liability insurance.
Commercial property insurance can be a significant expense for enterprises that use equipment worth millions or billions of dollars, such as railroads and manufacturers. For consumers, this insurance provides the same protection level as property insurance.
On the other hand, businesses can normally deduct the cost of commercial property insurance premiums as an expense.
Commercial property insurance usually does not cover damages caused by tenants utilizing the premises.
The worth of a company’s assets, including the building, is the major element in calculating how much it should pay for commercial property insurance.
A corporation should take an inventory of its physical assets placed on its premises before meeting with an agent to discuss coverage. This information will assist in determining the exact replacement value and the level of coverage that the company should obtain.
Weather conditions in the facility’s location have also become essential in determining the cost of commercial property insurance as the incidence of natural disasters has increased. Commercial insurance rates are often higher for properties in or within areas prone to weather-related disasters.
In California, for example, premiums are higher for residences near areas prone to wildfires.
Commercial Property Insurance Location Factors to Consider
Buildings with excellent fire protection in cities or towns often cost less to insure than buildings outside of cities or in locations with weak fire protection.
Buildings constructed with potentially combustible materials will have higher premiums, but those constructed of fire-resistant elements may receive a reduction. Additions to an existing structure may influence the fire rating, so consult an agent or insurance provider before renovating. A fire rating can also be affected by internal structural factors.
Using wood walls, floors, and stairwells in a fire-resistant building will almost certainly negate any rate savings. Interior fire-resistant walls, floors, and doors can assist in keeping a good fire rating.
The utilization of a structure influences its fire rating. A restaurant or car repair shop will likely score higher than an office facility. One hazardous resident will harm the fire rating of the entire building in a building with several occupants. Premiums will be higher if a firm is located in a building with a more dangerous tenant.
What is the distance between the nearest fire hydrant and the fire station? Is there a fire alarm and sprinkler system in place? What about installing a security system?
Considerations for Commercial Property Insurance
Some specific areas of your property to consider insuring include:
- The structure that houses your business, regardless of whether it is owned or rented
- All office equipment, whether owned or rented, includes computers, phone systems, and furnishings
- Accounting records and important business papers
- Equipment for manufacturing or processing
- Inventory is kept on hand
- Landscaping and fencing
- Satellite dishes and signs
Commercial Property Insurance Examples
Commercial property insurance can be used to protect against a range of risks. It can, for example, be used to seek compensation if a fire destroys your office equipment. Commercial property insurance is also beneficial in the event of theft. It can also be used to file insurance claims during a natural disaster.
According to Insurance Journal, the impact of Hurricane Maria in Puerto Rico left insurers dealing with 279,000 claims.
Is Property Insurance Required By Law?
Many types of commercial insurance are optional. However, while it is not required by law, all business owners should have a property and casualty insurance policy. Additionally, your landlord or lender may need you to have property insurance to protect their investment.
What Coverage Sections Are Included in Commercial Property Coverage?
You should be aware of the following coverage sections under commercial property coverage:
- Building coverage includes buildings, structures, permanently installed fixtures, machinery, and equipment.
- Business personal property consists of non-permanently installed furniture, fixtures, machinery, and equipment. Inventory and any other personal property your company holds and uses in its operations are also included.
- Personal property of others includes property in the care, custody, and control of your business but not owned by your business or you personally.
What Exactly Is “Coinsurance?”
You will be required under insurance plans to insure your buildings’ worth completely. If a structure is not insured to value, you may face a fine in the event of a loss. This penalty is commonly referred to as “coinsurance.” It is critical to read and understand your commercial property policy’s coinsurance clause and to raise any concerns with your broker/agent or a lawyer.
What Kinds of Losses Are Covered?
Property losses are covered or not depending on the policy language, exclusions, and endorsements. In your policy, you can specify the types of losses covered. There are two types of losses: stated dangers and open perils.
- Specified Perils: A list of each peril that must be insured against, such as fire, explosion, windstorm, or vandalism.
- Open Perils: Open perils coverage is more expensive than specified perils coverage. Unless excluded in the policy, it covers everything. This type of coverage often excludes earthquakes and floods.
Is It Possible to Tailor Your Insurance Policy?
To supplement your insurance, you can employ a variety of coverage forms and endorsements. These are some examples:
- Building Ordinance or Law: Covers damage caused by a building code violation or other zoning activity.
- Peak Season: An endorsement that imposes additional restrictions on personal property inventories during a specific period, such as peak shopping season.
- Legal Liability: Coverage for basic carelessness for unintentional damage or harm.
- Glass: If your home has a lot of glass, you should add a glass form to your policy that includes the number of panes, size, location, and other important facts. A separate glass deductible may also be stated.
- Element of Time: The most typical time element policies are business interruption, extra expense, and rent and rental value loss.
- Builder’s Risk: A one-year minimum period of coverage added to a policy to cover a new building or structure under construction or an existing structure undergoing additions, modifications, or other repairs.
- Enhancements: All permanently installed improvements remain in place even if an inhabitant leaves the building.
- Inflation Guard: Automatically changes insurance limits to keep up with price rises, preventing coinsurance penalties.
What if I Don’t Own the Property?
Many business owners lease office space to run their activities. If you fall into this category, review your lease to determine your insurance requirements.
In other circumstances, solitary tenants must insure the building or continue paying rent even if the space is destroyed. It’s a good idea to look through the lease with your insurance agent to ensure that the insurance coverage you choose is enough and will protect you in the event of property damage or loss.
Does My Company Need a Lawyer to Resolve a Commercial Insurance Issue?
Business insurance policies are typically sophisticated and detailed. Furthermore, state law governs company insurance and influences what your policy can cover.
Having an insurance lawyer review your company’s policy might assist you in comprehending its coverage. If your company must go to court, a lawyer will be familiar with your state’s laws and give you the best chance of prevailing.