Commercial Property insurance – introduction
When you buy a home, you need homeowner’s insurance to cover the asset against loss. When you own commercial property as part of a business, it requires coverage for similar concerns of physical loss. Of course, homeowner’s insurance is not applicable to a business property. It’s in scenarios such as these that you would consider purchasing an insurance policy.
Commercial Property insurance – definition
Your policy varies slightly depending on the carrier you buy the policy from. In the most simple terms, business property insurance is a type of coverage that protects buildings and assets that belong to the company. If you run a retail business and own the premises where your store is located, you’d use commercial property insurance to protect that building against loss. Similarly, if you’re a doctor in private practice, you’d use this policy to cover your office contents, tenant improvements, and betterments.
You’d also use Commercial Property insurance for two types of coverage: real property and business personal property, which cover a property you’re renting or leasing for business purposes, or for certain work-at-home situations.
What does Commercial Property insurance cover?
First and foremost, a business property insurance policy should cover any damage incurred to the building where you conduct your business. If your office building is lost or damaged in a fire, for instance, commercial property insurance covers that loss. Storm damage — including hurricanes, tornados, blizzards, and hail — would also be covered, as well as vandalism, and more.
Specific coverage varies from policy to policy. When you set up an insurance policy with your carrier or broker, you should tailor it to protect against the risks most prevalent in your geographic area. A Michigan-based company wouldn’t likely need the same coverage as a company headquartered situated in the middle of Tornado Alley. You should work with your broker to assess risk and put together a policy that makes sense for your business.
Commercial Property insurance covers more than just the building where you conduct your business. Indeed, your policy should also insure the contents in your building, including any movable property that your business owns. In a warehouse, contents protection might cover essential tools, equipment, vehicles, and storage systems your business uses daily. In a retail environment, it might protect product inventory. In an office, it might cover furniture, computers, servers, or even the re-creation documents and records.
Property insurance may extend to certain feet outside your building, to surrounding characteristics like your company sign, landscaping, fences, or external structures. All these assets can impact your ability to conduct business regularly. They are a part of your property and could be covered under the policy.
Your insurance policy may even extend coverage to critical business assets when they are used off-premises. For example, say an employee takes a company computer on a trip, and the device gets lost or stolen. Depending on your coverage, you may be able to submit a claim to replace the device.
The most important aspect of a property policy is its protection against loss of income or revenue in the case of property loss. These provisions provide net income and continuing expenses during period of restoration when direct physical loss incurred for business income. If your business has to shut down for two weeks due to a fire, your policy might reimburse you for some of the lost earnings from those down weeks.
Note: business property insurance does not include liability coverage. You need to purchase a standalone General Liability policy to obtain that type of coverage.
Commercial Property insurance examples
- Michelin-rated Manresa restaurant in Los Gatos suffered a sustained structural damage to its attic and ceiling, and a water and smoke damage throughout its interior of $300,000-400,000 caused by fire. The damage could take up to four to five months to repair.
- A massive Apple data center in Mesa, Arizona was on fire. The fire was limited to the roof-mounted solar panels above the building, prompting 50 workers at the plant to evacuate. These panels were part of a deal Apple had with the local community to provide power to 14,000 local homes.
- A fire damaged or destroyed about 50 boardwalk businesses in the adjoining neighborhoods of Seaside Heights and Seaside Park. A five-block area went up in flames, including many local businesses that had only recently recovered from hurricane Sandy.
Commercial Property insurance rates
How much can you expect to pay in rates? Frankly, there is no easy one-size-fits-all answer to that question. The cost varies dramatically depending on the characteristics of the property to be insured, the protective safeguards of the building, and the level of coverage you want.
Other factors can come into play as well, depending on how they increase or decrease your risk level. For instance, if your building was constructed using high-quality, fire-resistant materials, you’d pay less. If your building were equipped with the latest sprinkler systems, alarm systems, and other protections, those elements would also lower your risk, thus decreasing your rates.
Of course, some risk factors are harder to control. If you’re based in a high-crime area, you pay higher rates. Similarly, what your neighboring businesses do might also affect your rates. If you’re located right next door to a business that works with flammable materials, it amplifies your level of risk, which in turn spikes your rates.
Your most significant risk factor, though, is usually your business itself. What your business does, the amount of property you need to insure, and the dollar value of that property are the factors that are going to dictate the ballpark cost of your rates. For example, a factory is going to cost a lot more to insure than a run-of-the-mill office, since there’s a lot more expensive equipment to cover.
Summarizing Business Property insurance
Whether you’re purchasing insurance for a new business or trying to lower your rates by improving your building with new safeguards, it’s important to understand all the variables discussed above.
Having quality, comprehensive protection for your building and all your property is essential if you are going to avoid costly downtown or expensive property replacements. From fires and burst pipes to high winds and hurricanes, your insurance policy will provide the protection you need to do business with peace of mind.
With that said, you can easily overspend on business property insurance if you aren’t sure exactly what you need, or don’t know what steps you can take to lower risk levels and cost. Ultimately, the best course of action is to give us a call or sign up here. Our smart, data-driven platform guides you through the process with no strings attached.
Our expert brokers can help you identify your risk factors, and the types and amount of coverage you need. You can use this data to improve your building and reduce risk factors, or to start shopping around for more accurate insurance quotes.