Commercial Property Insurance

Embroker helps you get the right property insurance to protect all property vital to the daily operation of the business, covering not only to offices but also any other physical assets important to the company.

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What Is Commercial Property Insurance?

Commercial property insurance helps protect your business against asset loss. It is a core coverage in business owners policy (BOP) insurance. While the terms of a policy and explicit coverage vary from policy to policy, there are virtually no industry-specific differences.

The policy terms, limits, and retention should be tailored to reflect the assets and acceptable loss thresholds with regards to business property and income.

Who Is It For?

Any business that leases or owns office space, manufactures products, manages inventory, leases equipment, maintains the property of others should consider commercial property insurance.

Typically, commercial property is first secured when a lease is signed. Property owners will want their tenants to own and maintain insurance with limits adequate to repair or restore the building in the event of damage.

Why Do You Need It?

Commercial property insurance helps business owners protect all property vital to the daily operation of the business, extending not only to buildings, stores, and offices but also equipment, furniture, inventory and any other physical assets important to the company.

Commercial property insurance can cover a variety of losses including building, business personal property, property of others, business income, inland marine, and cargo.

Many premiums are on the rise due to an increase in catastrophic events in 2017 and 2018. According to a recent report, global losses from disaster events in 2017 totaled $144 billion, with hurricanes Harvey, Irma, and Maria causing a combined $92 billion of property damage and the California wildfires accounting for a record $14 billion in losses.

In 2018, California wildfires continued to set new frightening standards in commercial property risks, accounting for an additional $845 million in insured losses.

What Does Commercial Property Insurance Cover?

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. Your policy should also insure the contents of 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 of documents and records.

Property insurance may extend to certain assets 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 the period of restoration when a direct, physical loss is 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 for those down weeks.

What’s Not Covered?

When you are putting your commercial property insurance plan together, there is a range of perils that you can choose to include or exclude from the policy. This process should involve a detailed talk with your broker in order to determine what the most appropriate coverage is for your business.

You can make a decision in the end whether you want to be covered against “all perils” or only “named perils.” Naturally, you’re going to have to pay a higher premium to cover “all perils.”

When you have a “named perils” policy it’s just that, a list of every type of possible peril that your insurance will cover.

What Does Commercial Property Insurance Cost?

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 (COPE), 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 was 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 commercial property insurance 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 the 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.

To recap, generally, these are the main factors that are going to impact the cost of your commercial property insurance policy:

  • Geography: Where your business is located, what the land value is, how high or low the local crime rates are, and whether natural disasters are common in your area.
  • Safety: Does your business or a business located close to it use hazardous or flammable materials? How much have you invested in protecting it?
  • COPE Data: Looking at the state of your building and equipment – how old and in what condition are they? When was the last time the electrical wiring was checked or changed in your building? In the case of an accident, how much money would it take to rebuild your building to code? How old is your equipment and how hard is it to repair the equipment? Is it easy to find parts for your equipment?

According to a recent report on property insurance, the impact of recent natural disasters will greatly affect commercial property rates in the coming years, particularly when it comes to property and assets located in areas at risk for wildfires, floods, and hurricanes, especially when for multifamily properties.

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Brooks, Mc Ginnis & Company, LLC

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