Flames engulfed the building, and firefighters rushed the scene. You never imagined your business burning to the ground, but it happened.
Luckily, you were smart enough to have Commercial Property Insurance. While the physical building is beyond repair, your business will recover because you had the proper policies in place.
What is Commercial Property Insurance?
Commercial Property Insurance is coverage designed to protect any commercial property. It offers protection from natural disasters, theft, fire, equipment breakdown, repair costs, and lost revenue.
Imagine a New York businesswoman opens a second-hand clothing store. A week later, she arrives at the building to find the windows smashed and her inventory gone.
The thieves stole more than $100,000 in merchandise. For an entrepreneur just starting out, that is a lot of money. Without Commercial Property Insurance, this woman may struggle to reopen her business due to the lost capital.
Who Needs Commercial Property Insurance?
Any business that has physical assets that are essential to the revenue stream needs commercial property coverage. While these policies can be a significant expense, they should not be considered optional. Do not leave your company vulnerable.
What Does Commercial Property Insurance Cover?
Commercial Property Insurance covers anything related to the building used for business purposes. The building, equipment, certain landscaping elements, fencing, and more are covered with this policy.
There are three different types of coverage:
- Basic Form Policy: it covers standard natural disasters, fires, smoke, vandalism, and theft. For most businesses, this coverage should suffice.
- Broad Form Policy: it covers everything that basic form coverage does as well as protection from falling objects, the weight of snow or ice, water damage, and collapsing structures.
- Special Form Policy: it covers everything that is not specifically excluded.
How Much Does Commercial Property Insurance Cost?
How much you pay for Commercial Property Insurance depends on your business. Every business is different with variables that must be considered.
It is important to note that Commercial Property Insurance coverage can be offered in a business owner's policy, too. By combining General Liability Coverage and Commercial Property Insurance, business owners benefit from simplicity and cost savings.
A small business owner may pay as little as $500 per year, while a major corporation could pay $500,000.
The average business pays between $1,000 and $3,000 per million dollars of coverage. Most pay under $1,000 annually, with an average of $742.
For example, a mid-sized landscaping company with 20 to 30 employees may pay between $3,000 and $5,000 a year due to the increased equipment risks and storage space.
There are many variables considered when pricing a Commercial Property Insurance policy, including:
- Construction: How the business’ structure was built and its condition. Features like fire-retardant materials and upgraded HVAC systems can lower rates.
- Occupancy: Who occupies the business during office hours influences the rates. Companies with high-foot traffic or numerous employees pay more because higher occupancy means higher risks.
- Risk: The insurer will determine an overall risk for the business and building before issuing a rate. All variables are looked at before any policy is offered.
- Exposure: Insurers look at the location of the business. This determines if the surrounding area is problematic. If it is located in a high-crime neighborhood, then the rates are higher.
- Protection: Things like alarms and sprinkler systems can reduce Commercial Property Insurance rates. Proximity to a fire station or fire hydrant is also beneficial.
What Does Commercial Property Insurance NOT Cover?
Commercial Property Insurance is extensive but not all-inclusive. The standard policy will not cover commercial vehicles, personal assets, employee wages, and the following:
War: Most policies exclude damages caused to a building by war. This includes terror attacks and damage from missiles or another machine of war.
- Certain Fires: Fire coverage insures a building for damages caused by a fire that does not normally occur inside of the building. However, if the fire started from a place where a fire is natural, such as a stove, your claim could be denied if the fire escapes and damages your building.
- Earthquakes: This type of risk is excluded from all Commercial Property Insurance policies. Some carriers may offer an endorsement to add this coverage. Otherwise, you need to call an earthquake authority insurer to secure this coverage.
- Certain Smoke: Smoke damage on a standard policy is covered, but excluded if the smoke was from accidental occurrence. This includes when the smoke damage comes from a factory or various agricultural exposures.
- Act of God (Weather): Some insurance carriers allow for wind and hail coverage on a standard policy. Damage from ice dams, snow, dust, and sand are not typically covered. If those items are damaged outside of the building, and then damage the inside of the building, it may be insured. Floods are never included in a standard Commercial Property Insurance policy.
When talking about insuring commercial buildings, coinsurance refers to the percentage of the value the owner is required to insure.
For example, if you have a building worth $500,000, a policy with an 80% coinsurance clause requires you to have at least $400,000 in coverage.
This value can only be determined at the time of loss, which complicates the situation. If your insured amount is below the coinsurance percentage, you may pay a penalty.
Commercial Property Insurance is essential for any business with physical assets. Don’t risk losing your business when tragedy strikes.