By: Joseph C. Smith, CIC, CPIA, CBIA
Georgetown Insurance Service, Inc.
What is Commercial Property Insurance?
As a business owner, one of the most important types of insurance you need in your toolkit is commercial property insurance. Whether you own the building or are a tenant, commercial property insurance is necessary to protect you and your business from a variety of risks including damage to:
- Your premises
- Computers and other equipment
A basic business/commercial property policy protects a company’s physical assets from fire, explosions, burst pipes, storms, theft, vandalism, etc. depending on the type of policy in place. It usually covers the physical property and its contents plus exterior fixtures, like a fence or outdoor sign. For business owners who are tenants, the policy covers the contents of the space or building you’re renting and should include your interest in leasehold improvements that you have made or were made for you.
Some commercial insurance policies offer additional coverages depending on your company’s specific needs. Those may include:
- Compensation in the case of theft, or burglary
- Business interruption which covers the loss of income a business suffers after a disaster
- Coverage for lost items like tablets, phones, laptops, etc. when not on company property
Types of Coverage:
- Basic Form Policy – Covers standard natural disasters, fires, smoke, vandalism, and theft. This type of coverage is seldom enough for most businesses.
- Special Form Policy – This policy will cover most perils, except flood and earthquake, however, there are still exclusions in the policy. Flood and earthquake should be given special attention as to risk of loss, and if necessary, can be covered by a separate policy or endorsement.
The truth is, there is no clear-cut answer here. The cost of obtaining a commercial property insurance policy varies from business to business and is also dependent on the property’s location, type of construction, and protection provided such as sprinklers and/or public fire department service.
According to HowMuch.net, 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 but for small businesses, the average lands around $750.
One thing for business owners to be mindful of is that commercial property insurance coverage can be offered in a business owner’s “package” policy, as well. If the owner choses to combine general liability with a commercial property insurance policy, it can simplify the process and provide cost savings.
- Risks of loss due to cybersecurity concerns are one of the fastest growing areas of risk for most businesses today. A careful evaluation of how you use the internet is very important whether it’s for generating business or administrative purposes such as payroll, billing, or banking.
- If your company has more than one location, then coverage will be needed for each. Similarly, if your business operates from a home office, a commercial property policy is likely needed since a typical homeowner’s policy won’t cover business losses.
- If you choose to purchase a replacement cost policy, you must maintain the proper amount of insurance to make sure all your property is adequately covered. Values should be based on what it would cost using “like kind and quality” to replace your property. This phrase refers to a condition in an insurance policy that states that the insurer would cover the cost of repairing or replacing a covered loss with property similar to the original in composition and quality.
- Keep copies of your insurance policy in a safe place, outside of the office, in case they’re destroyed. In addition, you should also keep your expired insurance policies for at least 7 years and in some cases even longer.
- If a claim arises, contact your insurance agent immediately. Commercial claims can be much more complex and could present as a high-cost liability claim. Don’t try to handle these types of claims yourself as it could violate your insurance contract. Virtually all insurance policies require prompt notice of a claim and require that you do nothing to prejudice your carrier’s handling of a claim.
Keep in mind that coverages, deductibles, and options can vary from state to state. The best, proactive plan of action for a business owner is to consult a trusted insurance agent who can tailor fit a commercial property insurance policy for your company. Contrary to what many people think, over-shopping for insurance policies can be a negative for you. If you feel it best to obtain other insurance proposals, do so about every three to five years, unless you have reason to be dissatisfied or concerned about the service you are receiving.
Have questions? Contact us to speak with a licensed insurance professional.