10 Tips for Purchasing Commercial Property Insurance

Commercial property insurance is an essential coverage for any business owner. It protects your commercial building, contents, loss of income, and liability exposures. With the right commercial property insurance policy, you can have peace of mind knowing you are protected financially in the event of unforeseen disasters.

10 Tips for Purchasing Commercial Property Insurance

This article will provide an overview of commercial property insurance, its components, and tips for purchasing the right policy.

What is Commercial Property Insurance?

Commercial property insurance is designed to protect commercial buildings, contents, and income in the event of damage from of loss. It can cover physical damage to your building and business personal property.

It also covers loss of income if your business is forced to temporarily close after an insured loss. Common causes of loss include fire, lightning, windstorm, vandalism, theft, water damage, and more.

Commercial property policies typically cover the building, improvements, fixtures, permanently installed equipment, furniture, inventory, and other business contents.

It’s important to insure your commercial property to its full replacement cost value to avoid being subject to coinsurance penalties. Work with your insurance agent or broker to properly value your commercial building and contents.

Why is Commercial Property Insurance Important?

There are several important reasons to invest in comprehensive commercial property insurance:

  • Protect your building & assets – The building itself, plus equipment and inventory can represent a significant financial investment. Property insurance helps transfer the financial risk of loss.
  • Safeguard income – If a covered loss forces you to suspend operations, business income coverage will replace lost revenues so you can pay ongoing expenses.
  • Meet loan requirements – Most commercial mortgages require you carry property insurance. Make sure your policy meets your lender’s requirements.
  • Aid recovery after a loss – With proper coverage, insurance proceeds are used to repair or rebuild your property and replace damaged contents.
  • Support premises liability claims – Liability is often included to protect against third-party injury lawsuits stemming from your property.

Having adequate insurance encourages business investment, benefits your financial health, and allows you to promptly restore operations in the aftermath of disasters both large and small.

What Does Commercial Property Insurance Cover?

Commercial property insurance policies contain a number of important coverages for physical loss or damage to your building and contents.

Some of the protections covered:

  • Building – Covers structural damage to the commercial building itself and attached fixtures.
  • Business Personal Property – Furniture, inventory, equipment, machinery, and other contents are covered.
  • Loss of Income – Reimburses income lost while restoring operations after a covered loss.
  • Ordinance or Law – Covers the increased costs to rebuild in compliance with current building codes.
  • Equipment Breakdown – Repairs or replaces equipment, boilers, and machinery that break down.
  • Signs – Covers damage to outdoor signs not attached to the building.
  • Glass – Pays for broken glass replacement and temporary boarding.
  • Tenant Improvements – Improvements you made as a tenant are covered.
  • Debris Removal – Pays the costs to clean up debris after a covered loss.
  • Liability – Protects against liability for third-party bodily injury or property damage.

You have to discuss your specific needs with your agent to craft a policy tailored to protect your commercial property exposures.

What Does Commercial Property Insurance Not Cover?

While commercial property insurance is comprehensive, it does contain some exclusions. Common losses excluded are:

  • Normal wear and tear or gradual deterioration
  • Losses stemming from lack of maintenance
  • Losses caused by vermin, birds, rodents, or insects
  • Acts of war
  • Nuclear hazard
  • Intentional loss caused by the insured
  • Accounts receivable or valuable papers
  • Unauthorized vehicle use

It’s important to read your policy carefully to understand what causes of loss are covered and which are excluded. Contact your insurance professional to discuss your risks and the right coverages.

Key Factors That Affect Your Commercial Property Insurance Rates

Multiple variables will impact the premiums you pay for commercial property insurance coverage. Key rating factors include:

  • Location – Properties in areas prone to natural disasters or high crime will cost more to insure.
  • Building characteristics – Your premium is affected by building age, construction, size, and other characteristics like fire suppression systems that reduce risk.
  • Intended use – The type of business and how the building is occupied will impact rates.
  • Claims history – Frequent past claims can increase your premium, while a low loss history can save you money.
  • Deductible – Choosing a higher deductible lowers premiums but increases your out-of-pocket costs in the event of a claim.
  • Discounts – Credits like multi-policy discounts, fire extinguishers, alarms, and other risk-reducing factors can reduce premiums.

Work closely with your commercial insurance agent or broker to discuss these variables and find potential savings when comparing commercial property insurance quotes.

10 Tips for Purchasing Commercial Property Insurance

Follow these handy tips as you shop for the right commercial property policy:

  1. Insure to value – Avoid coinsurance penalties by insuring your building and contents to their accurate replacement cost value.
  2. Mind building codes – Ensure your coverage includes ordinance or law protection so you can rebuild to current codes.
  3. Consider business needs – Tailor your policy with the coverages your particular business requires.
  4. Analyze exposures – Review both property risks and liability exposures on your premises.
  5. Research insurers – Compare quotes from multiple reputable commercial insurers.
  6. Review exclusions – Understand what causes of loss are excluded by your policy.
  7. Meet lender requirements – Confirm your coverage meets the requirements set by your commercial mortgage lender.
  8. Select optimal deductibles – Balancing premium savings against higher out-of-pocket costs.
  9. Add loss prevention measures – Implementing sprinklers, alarms and other precautions can earn premium discounts.
  10. Work with a broker – An independent insurance broker can help craft the right policy.

Purchasing the optimal commercial property insurance coverage takes an investment of time and effort. But having proper insurance in place is crucial to protect your valuable commercial assets and income.

Frequently Asked Questions About Commercial Property Insurance

Business owners often have many questions when shopping for the right commercial property insurance policy. Here are answers to some frequently asked questions:

Does commercial property insurance cover flood and earthquakes?

Most basic commercial property policies exclude flood and earthquake damage. These require adding a separate policy or endorsement.

Can I insure rented commercial space?

Yes, you can purchase a commercial tenants policy tailored to rented business premises.

Does my claim history impact premiums?

Yes, frequent past claims can increase your costs. Maintaining a low claims history helps keep premiums down.

Does commercial property insurance cover equipment breakdowns?

Optional equipment breakdown coverage repairs or replaces mechanical equipment that suffers damage from electrical, mechanical, or pressure systems breakdown.

Are actions by rioting, civil commotion, or vandalism covered?

Yes, these causes of loss are typically covered subject to policy sublimits, deductibles and exclusions.

Are there any discounts available?

Yes, adding risk-reducing features like alarms and sprinklers and maintaining a favorable claims history can earn premium discounts.

Does business income coverage reimburse lost profits?

No, it covers continuing operating expenses and documented lost revenues until operations can be restored.

Connect with your insurance broker if you have additional questions about commercial property insurance and securing the right policy for your needs.

Conclusion

Commercial property insurance provides vital protection for your physical building, contents, loss of income, and premises liability exposures.

While premiums and deductibles represent a cost of doing business, this insurance can be invaluable when disaster strikes. The right policy gets your business back on its feet quickly after a covered loss.

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