Commercial property insurance is a type of policy that covers a business’s property and equipment from the risks associated with disasters. Outlined below is a closer look at the coverage provided by this type of insurance.
What Perils Are Covered By Property Insurance?
Property insurance typically covers perils such as theft and vandalism, as well as weather-related incidents such as damage due to hail, wind, fire, lightning, ice or snow. It offers protection to the structure as well as its contents and can offer liability coverage in events where someone other than the owner or renter of the property is injured on site and files a lawsuit.
There are some notable exceptions to be aware of, however. This will vary depending on the policy, but most property insurance policies will exclude damages from events such as drain and sewer backups, standing water, floods, tsunamis and seeping groundwater. These policies also often make exceptions for earthquake damage, mold, acts of war, terrorism and nuclear events.
Property insurance will typically use one of two main approaches for coverage:
- Actual cash value – This type of coverage will pay the property’s owner or renter the replacement cost of the damaged items minus depreciation. This means that if a destroyed item is 15 years old, they will receive the value of a 15-year-old item rather than that of a new one. Because this type of policy only pays out what the item is currently worth, it tends to be less expensive.
- Replacement cost – This will cover the cost of repairing damaged property or replacing it with something new of an equal value. However, this type of coverage is based on replacement costs instead of an item’s cash value. It is considered the best approach for businesses that depend on high-tech equipment, such as IT companies, despite its higher cost.
Commercial Property Insurance Coverage
Commercial property insurance generally covers a business’s real estate and contents. This may include:
- A business-owned building – A commercial property insurance policy will protect a building that is owned by a business against vandalism, fire and other types of damage.
- Fixtures and furniture – All of the fixtures and furniture inside a rented or owned building are typically protected by this type of policy.
- Inventory – Commercial property insurance provides coverage for a business’s inventory against certain causes of loss, such as fire and theft.
- Equipment and supplies – In the event that a business’s equipment and supplies are damaged, stolen or lost, commercial property insurance can help cover a repair or replacement.
Although this type of insurance generally covers commercial buildings and their contents, not every type of property will be covered. You may need additional coverage for items that are in transit or moved to different work sites.
It is also important to note that business interruption insurance may also be needed to cover the financial losses that are incurred when a disaster forces a business to close its doors on a temporary basis. This may cover employee wages, the loss of income and other everyday expenses for the business.
The Cost Of Commercial Property Insurance
The cost of commercial property insurance policies vary significantly. Some of the factors that are used to calculate premiums include the location of the business, the type of business they conduct, and the value of their property. Any safety measures that have been put in place to mitigate damage, such as sprinkler systems, can bring the price down.
Property owners have some control over the price they pay by choosing the deductibles, policy limits and other coverage options. However, this type of insurance is generally considered very affordable.
Who Needs Commercial Property Insurance?
Business tenants are generally required by their landlords to present proof that they have obtained a commercial property and liability policy before renting from them. However, even in cases where it is not required, any business that owns a building, expensive inventory or valuable equipment needs this type of insurance to help them recover from the financial devastation of theft, fires and other incidents.
For companies operating in the IT and technology industries, the costly equipment kept on their premises can make them a target for thieves. This type of policy can prove valuable in covering the expense of replacing stolen items. Meanwhile, for retailers, wholesalers and manufacturers, commercial property policies can be useful in protecting the items kept in the business space.
Construction companies and contractors also need property insurance to cover the different risks they face, with options ranging from contractors’ tools and equipment insurance to protect their power tools as they bring them to various job sites, to builders’ risk insurance to cover structures that are currently under construction.
Discuss Your Property Insurance Needs with Business Benefits Group (BBG)
Protect your company’s assets and future from the unexpected with a tailored insurance policy from the insurance brokers at Business Benefits Group (BBG). Contact us today to learn more about the protection we offer.