UPDATED: Mar 19, 2020
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Commercial property insurance is designed to help businesses recover from covered events which result in the loss of its property. This can include the value of the building the business owns and the cost to repair or rebuild it. Commercial property insurance also covered the businesses property such as computers, equipment, furniture, inventory, and other things used in a business. This coverage also covers the company’s outdoor signs as well as any fencing or landscaping that exists on the property. The businesses property is covered both at the business location and away, such as a laptop that is taken to client’s homes. Additionally, if the business has the care, custody, and control of a customer’s property that is also covered under this type of insurance policy if it were to be damaged or destroyed in a covered loss.
What Commercial Property Insurance Covers
There are two ways that a commercial property insurance policy covers losses, an all risks policy with exclusions or a named peril policy. An all risks policy will cover any damaging event except that which is specifically excluded. Two common exclusions are flooding and earthquake damage. This type of policy covers all of the most common perils to commercial property such as fire, theft, smoke damage, vandalism, and wind damage. A named peril policy only covers the perils that are named on the policy. These types of policies are less expensive than an all risk policy.
There are also two ways that the property is covered under the policy, either at actual cash value or replacement cost. An actual cash value policy is less expensive as it only covers the current value of the lost property which is the original value of the property minus depreciation. Replacement cost policies are more expensive as they cover the cost of replacing the lost or damaged property. As an example, a couch lost in a fire that was purchased for $1000 five years ago might be worth only $200 today, but with a replacement cost policy a new couch similar to the lost one will be covered under the policy.
Another way that commercial property insurance helps a company recover from a loss is providing coverage for lost business income. If property damage occurs which results in the company losing business for an extended period of time, the commercial property insurance policy will cover this lost income up to the length of time specified in the policy which is usually 12 months.
How To Know If You Need Commercial Property Insurance
An event such as a fire can be very costly to recover from. According to The Insurance Journal, the average amount of a fire claim is $35,000. Wind and Hail claims average $26,000 while Burglary and Theft, which accounts for 20% of all claims, averages $8,000. If these weren’t insured against by a small business it could easily put them out of business after such an event occurring. The cost of a commercial property insurance policy is quite low when measured against what it is protecting against happening.
Businesses that store a lot of inventory are especially vulnerable when it comes to commercial property. Some small businesses have hundreds of thousands of dollar worth of inventory that could all be lost overnight in a fire. All businesses, but especially smaller ones, should insure their property just as homeowners and renters should be doing as well. Businesses that are leasing their space do need policies to cover their business property as the landlord’s policy only covers the building itself.
The Cost Of A Commercial Property Insurance Policy
The cost of a commercial property insurance policy is going to completely depend on how much coverage the business needs. Those that need to cover the building their business is in will be more expensive than those businesses that are just leasing their space.
Before meeting with an insurance agent to get a quote for this type of policy, it’s a good idea to take an inventory of the property that is used in the business. The numbers should include the value of the building, if applicable. The numbers should also include the value of all of the office equipment such as computers, phone systems, and furniture. Those businesses that keep inventory on hand should have a good idea of how much they usually store as well as what the maximum value of the inventory is likely to ever be. If there are any outside business signs the value of those should be accounted for. There is also value in accounting records and other business documents which should be accounted for as well.
After having the numbers for the amount of business property that will be needed, that amount will affect the cost of a commercial property insurance policy. Of course, the more there is to cover the higher the cost of the insurance policy is going to be.
Where To Get Quotes and Buy A Commercial Property Policy
Almost any insurance agent is able to quote and sell commercial property policies. The costs of a policy will differ from insurance company to insurance company so it’s a good idea to get at least three quotes.
All of the major insurance carriers in the United States sell commercial property policies. This includes Allstate, State Farm, Hartford, Nationwide, and Farmers Insurance. Any captive agent of one of these insurance companies can provide a quote for a commercial property policy. There are also independent insurance agents who can get quotes from a variety of different insurance companies for these types of policies.
How To Save Money On A Commercial Liability Policy
Getting in contact with at least three insurance agents is a good way to compare commercial property quotes between different insurance companies. There are also a few ways to keep the rates down, especially for small businesses which need to very closely manage their business expenses.
Even though the amount of commercial property a business needs to insure might be a fixed number for a business, they can increase the deductible in order to save money. The deductible is the amount of a covered claim that is not covered. If a policy has a $500 deductible and a $10,000 fire, they will receive $9,500 in compensation for the loss. Similarly, a business that elects to have a $1000 deductible would receive $9,000 once the claim is settled. Higher deductibles result in less premium being charged by the insurance company.
Another way to save money is to have a named peril policy instead of an all risks policy. If the named peril policy includes the types of perils the company is likely to face than this could be an option to reduce rates with the danger that if something occurs that isn’t named there will not be any coverage under the policy.
Having an actual cash value policy instead of a replacement cost policy will save money. The problem is that the amount of the claim will not be sufficient to replace the lost property in all likelihood, especially if it’s older equipment, furniture, and the like. This is especially the case with technology such as computers as they rapidly lose their value.
A good way to save money on commercial property insurance for a small or medium-sized business is to buy a Businessowners Policy, more commonly known as BOP. A BOP provides a package of insurance products that are commonly needed by a business. A BOP includes general liability, business property insurance, and business interruption insurance. Because these are sold as a package, a BOP generally costs less than buying these separately.