COMMERCIAL PROPERTY INSURANCE BASICS (COSTS, COVERAGE & OPTIONS)

The building you operate out of; the equipment; the inventory; the furniture: you rely on several physical assets to keep your business running. What would happen if any of those things were damaged or stolen?

Not only would operations be disrupted, but you’d also be looking at a pretty hefty bill to repair or replace them. That’s why you need commercial property insurance.

This type of insurance is specifically designed for business owners. Learn about commercial property insurance basics. It protects their building and the contents within it from the losses that these policies cover. Unexpected incidents can occur at anytime, such as a fire or vandalism, and commercial property insurance offers the financial help that is needed to assist you with recovering from such incidents.

What Does Commercial Property Insurance Cover?

While coverage does vary from provider to provider, generally, commercial property insurance covers the following:

• The building your business operates out of, whether you own or lease it.
• Inventory inside the building
• Equipment within the building
• Furnishings in the building
• Outdoor elements, such as the signage, landscaping, fencing, and lighting
• Machinery, such as HVAC equipment

A business property insurance policy protects against various perils that your business could suffer, such as fire, vandalism, and theft. For example, if someone stole inventory from your business, your commercial property insurance would cover the loss and help you replace it.

Is There Anything Commercial Property Insurance Doesn’t Cover?

While commercial property insurance generally covers all of the physical assets that are associated with your business, there are certain things that this type of policy will not cover. Commercial property insurance basics. For example, it doesn’t cover things like third party injuries or employee injuries. For the former, a commercial liability insurance policy would be needed, and a workers’ compensation policy would cover the latter.

It should also be noted that while a commercial property insurance policy will cover things like fire, or damages that occur when a tree falls into your building, it won’t cover certain damages. For instance, it will not protect against floods or earthquakes. If your organization is located in an area where such events commonly occur, you should consider investing in a specialized policy that is intended to cover these types of events.

How Do You file a Commercial Property Insurance Claim?

If you are faced with a peril, such as a fire or an act of vandalism, you would file a claim with the carrier that provides your commercial property insurance. If it is determined that the claim is covered by your policy, an adjuster will assess the damage to determine the value of the loss. After paying your deductible (the amount that you are responsible for covering before your insurance kicks in), your provider will issue moneys to assist with covering the rest of the losses that were valued by the adjuster – up to your policy limit.

For example, if you have you have a $2,000 deductible on your commercial property insurance, your commercial property policy has a limit of $50,000, and the damages were valued at $30,000, you would have to pay $2,000 to cover said losses and your insurance company would cover the remaining losses.

Actual Cash Value vs Replacement Cost Property Valuations

Commercial property insurance plans reimbursing policyholders for their losses based on the replacement cost of the item or its actual cash value.

• Replacement Cost (RC) – This is the cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose – with no deduction for depreciation.
• Actual cash value (ACV) – Also known as ‘market value’, most insurance companies prefer this valuation method when reimbursing policyholders for their losses. Actual cash value is the replacement cost minus depreciation (ACV = replacement cost – depreciation).

The only difference between replacement cost and actual cash value is the deduction for depreciation. Both valuations are based on the today’s cost to replace the damaged property with new property.

How Much Commercial Property Insurance Do You Need?

Every business has different needs, and therefore the amount of commercial property insurance coverage will vary from organization to organization and by location. To determine how much coverage you need, you should consider what you want to be covered by your policy, as well as the value of those items. If you are unsure of what you should have covered and what the value of those items are, speak to a reputable insurance broker that specializes in commercial property insurance for assistance.

How Much Does Commercial Property Insurance Cost?

Several factors are taken into consideration when determining the cost of commercial property insurance. These factors include:

• The location of your business. For example, buildings that are situated in areas that have reliable fire protection will cost less to insure than those that are located in areas where fire protection is limited.
• The materials that your building is constructed out of. For instance, if your business is made out of materials that have the potential to be highly combustible, your insurance will cost more than it would if the structure were built of materials that are fire-resistant.

These are just some of the factors that will impact the cost of your commercial property insurance. Of course, the amount of coverage you need will also impact the cost.

Why You Need Commercial Property Insurance – The Bottom Line

Commercial property insurance basics. Unexpected events and accidents can occur at anytime. Imagine the hardships your business would face if a fire broke out or your equipment were destroyed? With commercial property insurance, the financial strain of these types of situations will be a lot less damaging to you and your business.