How to Get Commercial Property Insurance – Forbes Advisor


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There are many types of accidents that can cause a major financial setback for a small business. A burst pipe or extreme weather conditions could destroy your office equipment. Or worse, a fire could wipe out your inventory, business records, and building.

Fortunately, commercial property insurance helps pay for these types of incidents (and more). This is a basic type of coverage that you’ll find with the best small business insurance companies.

What is commercial property insurance?

Commercial property insurance pays for the replacement or repair of your commercial property if it is lost, stolen or damaged by issues covered by your policy (such as fire). This type of coverage is also called business property insurance.

Commercial property insurance is often bundled with general liability insurance and business interruption insurance as part of a business owners policy (BOP).

What does commercial property insurance cover?

Commercial property insurance generally covers your business building or office, equipment, tools, inventory, supplies, computers, business furniture, valuable papers and business records. It also covers exterior installations, such as fences and signs.

Other people’s property is also covered by commercial property insurance.

Check if the policy is a “named perils” or “open perils” policy.

  • A named risk policy will only cover the costs of issues specifically listed in the policy, which generally include fire, theft, vandalism and wind damage.
  • An open risk policy will give you more protection. It will cover all issues except those listed as exclusions (eg flood damage). Due to its better protection, it will cost more than a named risk property insurance policy.

What issues does commercial property insurance cover?

The types of issues covered by commercial property insurance generally include:

  • Fire
  • Flash
  • Wind
  • Hail
  • Flight
  • Vandalism

What does commercial property insurance not cover?

It’s important to be aware of when business property insurance won’t help and where you might need additional coverage. Here’s when commercial property insurance won’t help:

  • You have a car accident while driving the company car on a business delivery. This scenario would be covered by commercial auto insurance.
  • Bad weather has caused flooding in your office building. Flood damage is not covered by commercial property insurance. You will need to purchase a separate flood insurance policy to protect your office space against the costs of flood damage.
  • You accidentally damage a client’s wall while visiting them for business. This type of property damage would be covered by general liability insurance.

Who needs commercial property insurance?

Commercial property insurance is not required by law, but is considered an essential type of coverage for most small business owners. Without it, you would have to pay out of pocket to repair or replace your business assets if they were damaged by a problem, such as vandalism or high winds. In the worst case, like a massive fire, it could put you out of business without insurance as a financial backup.

Types of small business owners who typically purchase commercial property insurance:

  • Owning, renting or leasing an office, store or building
  • Own, rent or lease tools and equipment
  • Have inventory or products
  • Depend on company assets like computers and office equipment
  • Have business records and documents

How much does commercial property insurance cost?

Commercial property insurance has a median cost of $63 per month or $756 per year according to Insureon.

You don’t have to be a homeowner to purchase commercial property insurance for your business. You can get coverage if you rent your office space and/or office equipment.

The cost of commercial property insurance mainly depends on the value of the goods and assets of the business. A person insuring a home office would pay significantly less in commercial property insurance than a business with its own office building, but both have commercial property that could be protected by a commercial property insurance policy.

Here are some other factors that insurance companies consider when pricing commercial property insurance policies.

The location of your business. Is it subject to wind or rain storms? Bad weather can damage a company’s property.

The construction of your building. Was the building constructed with fireproof building materials? Are the plumbing and electrics up to date?

Your industry. An accountant’s office is likely to carry far less risk than a delicatessen.

Protection against fire and theft. How far is the nearest fire station? What type of fire alarm and sprinkler system does your business have? What type of security system is in place to thwart thieves?

How to Get the Best Commercial Property Insurance

Here are some things to consider when buying commercial home insurance.

Purchase commercial property insurance under a business owners policy

If you are a small business, you can purchase homeowners insurance under a Business Owners Insurance Policy (BOP). A BOP combines commercial property insurance, general liability insurance and business interruption coverage. Buying the policies in a package like this can be cheaper than buying them separately.

General liability insurance protects a business against many claims, such as bodily injury and property damage, copyright infringement, reputational damage, and publicity damage. If someone sues your business for any of these issues, professional indemnity insurance will pay for the legal costs and any settlements or judgments.

Business interruption insurance helps a business recover lost revenue due to a covered peril. If you are ever unable to open your business due to a problem covered by the policy, such as a fire or a windstorm, this type of insurance reimburses you for lost business income.

Business interruption insurance is also known as business income insurance.

A business owners policy costs an average of $57 per month, according to Insureon.

Replacement cost coverage vs. actual cash value coverage

There are generally two types of commercial property insurance: replacement cost and actual cash value.

  • Replacement cost coverage will pay to rebuild or replace your business property using materials of the same or comparable value. There is no capital cost allowance.
  • Actual Cash Value Coverage will pay the current value of the property that was damaged. This accounts for depreciation, so a claims check will not be enough to replace what has been lost with new items; you would have to pay the difference. However, having actual cash value coverage will lower your monthly insurance bill.

Do I need commercial property insurance for my home business?

Depending on the size and needs of your business, home business insurance through your home insurance company may suffice.

But commercial property insurance provides broader coverage than a home insurance policy and can better protect a business and all of its physical assets and equipment.

Commercial insurance made easy

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