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What Does Commercial Property Insurance Cover? A Complete Guide

What Does Commercial Property Insurance Cover?
Table of Contents

Did you know there are 30.7 million small businesses in the U.S.?

If you own a business, you know that you need insurance to help protect what you’ve worked so hard for. Not only do you need worker’s compensation coverage for your employees, but you also need property insurance to protect your buildings and equipment.

Many business owners aren’t sure how to select the right property insurance coverage, and they wonder if they’re paying too much. Fortunately, you have options. You can choose the coverage levels you need and compare quotes to get the best price.

What does commercial property insurance cover? How can you make sure you have the protection you need? Here’s what you need to know.

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What is Commercial Property Insurance?

Commercial property insurance is designed to help you replace or repair physical property if it’s damaged due to a covered incident. For instance, if there’s a fire at your business location or warehouse, your property insurance will help cover the damage.

The basic level of property insurance will cover damage, up to a specific dollar amount, for common hazards. These include fire, explosion, theft, vandalism, and vehicle or airplane damage.

If you want additional protection, you can add endorsements to cover other events as well. You might add coverage for an earthquake or get specific glass coverage.

Before you get a commercial policy quote, you’ll want to take an inventory of what your business owns. Knowing what you need to cover will help you get the proper amount of insurance.

Property to consider includes:

  • The buildings that house your business and inventory
  • All office equipment, including computers, phones, furniture, cabinets, and more
  • Essential company documents and records
  • Equipment used for processing or manufacturing
  • Inventory
  • Signs, fences, and any outdoor property
  • Landscaping

You will want to include all property that your business owns or controls. If it’s leased or rented, you’ll need a specific type of commercial property coverage, but it will still be included in your policy.

Who Needs Commercial Property Coverage?

You might wonder if your business is too small to need property coverage. The truth is, there’s value in what your company owns, even if it’s small.

Very few business owners can afford to completely replace their commercial property if it’s damaged theft, fire, or another incident. Even if you can, your money can be put to much better use elsewhere.

Some leases, mortgages, and loans require commercial property insurance to protect the value business assets as well. You definitely want to ensure you meet those requirements with the appropriate coverage.

Every business owner needs to protect its business property with commercial coverage. Even if you could replace everything yourself, there’s no reason to do so.

What Does Commercial Property Insurance Cover?

The specific coverage your policy offers will vary depending on your policy and the coverage options you choose. You’ll want to ensure that the hazards specific to your area are included. For instance, if you live in a tornado-prone area, that should be covered.

Assets Covered

When you think of business property, you probably think immediately about your business location, storefront, and warehouse. Those are important assets to cover, but business property insurance includes much more than that.

The contents of your building should be included in your policy as well. Essential tools, equipment, vehicles, storage systems, and inventory are part of contents coverage. So are furniture, computer equipment, and even the re-creation of essential documents.

Your property coverage extends outside your building as well. External structures, including storage buildings, may be included. Commercial property coverage also protects landscaping, fences, and signs.

Finally, your property coverage includes protection against lost income due to a property loss. This section provides net income and expenses during the period of restoration after a covered loss.

Understanding Valuation

Another important aspect of property coverage is the type of valuation you choose. You can either have your property content based on actual cash value (ACV) or replacement cost (RC).

When equipment or property is damaged due to a covered event, the payment you receive is based on one of these two valuation methods.

Actual cash value is the cost to replace the property, minus depreciation. This generally means that the money you receive isn’t enough to go out and buy new equipment.

On the other hand, replacement cost pays out the cost to replace the property, without any deductions. This type of coverage allows you the amount necessary to repair, replace, or rebuild on the same premises. It would be best if you had enough to use comparable materials and quality to the original.

Covered Perils

The events that happen that trigger insurance coverage is called covered perils. These include incidents like a fire or a theft.

A basic commercial insurance policy coverages include fire, explosions, burst pipes, storms, theft, and vandalism. Any other coverage, including earthquakes, wind damage, flood, or other perils, has to be added specifically.

You may also choose to have a policy that covers all perils unless they are specifically excluded. This type of insurance is more expensive but will help you have more comprehensive coverage.

Additional Commercial Property Coverage Options

There are a variety of other available coverages that you can add to your basic commercial property insurance.

If you’re constructing a new building, you may want a builder’s risk insurance. This short-term policy helps protect you as you build a new office or warehouse. If something happens during the building process, coverage will help you recover your losses.

Improvements and betterments coverage may be required if you have a loan for business property. This provides coverage for all permanently installed improvements which cannot be removed when a tenant leaves the building.

Glass coverage is a specific insurance that helps you replace damaged glass. There will be limits per window pane and per occurrence. Make sure that the coverage limit is high enough to provide the protection you need.

You can also add additional coverage for peak seasons. Some companies have specific times of year that they carry additional inventory and need additional coverage.

Finally, you might consider having an inflation guard. This will help your insurance coverage values adjust to keep up with inflation.

What Does Commercial Property Insurance Not Cover?

Commercial property insurance is one part of a business insurance policy. However, you need comprehensive commercial coverage to ensure you get all of the protection you need.

Commercial Liability

For instance, property insurance doesn’t include coverage for someone who falls and injures themselves on your property. If a customer trips on the sidewalk, or slips on the floor, or otherwise is injured, they’re likely to sue for damages.

Your commercial liability coverage will help protect you in this case. You’ll want to make sure you have a sufficient limit to protect you know matter what happens.

Many business owners choose to have umbrella coverage, which is additional liability protection over and above the normal insurance policy.

Is umbrella insurance worth it? If you get sued for liability issues, it certainly is. Not only will the umbrella policy help if you’re found liable, but it pays to defend you in court as well.

Automobile Insurance

While your business may own vehicles as part of your assets, commercial auto insurance is a separate type of coverage. If you or employees are driving for business, you’ll need this kind of insurance.

Commercial auto coverage includes liability in case you cause an accident. Your liability coverage helps pay for injuries to you cause to others and damage to other vehicles.

You’ll also have coverage for damage your vehicle. Collision coverage helps repair your car if you cause an accident. Comprehensive coverage helps repair it if you have hail damage, hit an animal, or have other not-at-fault damage.

Worker’s Compensation

Worker’s compensation is a required coverage that helps pay for employees’ injuries if they are hurt during work. The paid benefits will depend on the type of injury or illness sustained.

Commercial property coverage doesn’t include worker’s compensation, even if the injury is caused by damaged property.

How Much Does Commercial Property Insurance Cost?

The amount you pay for commercial property coverage will vary depending on the insurer and the coverages you choose.

For instance, an actual cash value (ACV) policy will be less expensive than a replacement cost (RC) policy. Named perils coverage will be less expensive than open perils coverage as well.

If you add additional options to your insurance, the price will also go up. For instance, glass coverage, inflation protection, or additional perils will add to your annual premium.

Finally, your coverage cost will depend on the deductible you choose. Your deductible is how much of the loss you are responsible for. The insurance company then pays the rest, up to the limits of the policy.

The key to affordable coverage commercial property coverage is to make sure that you shop around and compare prices.

Benefits of Commercial Property Coverage

The biggest benefit of commercial coverage is the peace of mind you get while you run your business. There are a lot of things that can go wrong, and you want to protect yourself.

You’ve worked hard to succeed with your company. There’s no reason a fire or theft or another incident should reduce all of that to nothing. Commercial property insurance helps ensure that you have money to rebuild or replace equipment if you need it.

Another important benefit of commercial property insurance is that it’s required to get a loan or a lease on important equipment. The lender wants to make sure the asset that backs up the loan is protected if anything goes wrong. Having insurance helps you get approved for the funds you need.

Commercial property insurance helps assure you and your customers that your business will continue even if an unfortunate event happens. Business continuity is important to you, your buyers, and your suppliers.

Having coverage for the equipment, buildings, and outdoor items that are essential to your business is the primary benefit to commercial property coverage. You can rest easy knowing your company will be able to rebuild if something happens.

Compare Commercial Property Quotes

Now that you know the answer to “What does commercial property insurance cover,” you’re ready to obtain the insurance your business needs. Remember that property coverage is only one part of the overall business policy you need to succeed.

With LoPriore Insurance Agency, you can get a comprehensive commercial policy. It can include commercial liability, worker’s compensation, auto insurance, and property coverage. We offer insurance policies from various insurance companies, so we can work with you to compare quotes and help you get the coverage you need.

Our agency was founded in 1995, and over the years, we’ve helped countless families and businesses obtain the insurance coverage they need. We are proud to give our customers the peace of mind they’re looking for by providing high-quality insurance policies.

We provide personalized service along with competitive rates on essential commercial insurance products. We can help you customize your quote to fit both your business needs and your budget. You won’t find any one-size-fits-all ideas here.

If you’re ready to get started with commercial insurance, including commercial property coverage, we’re here to help. Contact us for a quote today!

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