Commercial property insurance is insurance coverage that protects businesses against unforeseen events that may cause a loss of physical property.
It protects the commercial property against threats like fire, natural disasters, and even theft. Commercial property insurance can safeguard you from significant financial losses, whether you are a manufacturing, retail, service-oriented, or not-for-profit business. These losses could occur in the form of:
- A leak in the water pipe ruined important documents
- An earthquake caused the back wall of the factory to collapse
- Heavy rainfall destroying your billboard
- A workplace fire could destroy all contents of your building.
Why Do I Need Commercial Property Insurance?
As a business owner, opting for commercial property insurance coverage can be highly beneficial. When your business uses equipment and machinery worth millions of dollars, losing them to a fire or natural disaster can mean unbearable losses.
Similarly, it can be even more challenging for small-scale businesses to replace stolen or destroyed machinery with the current lack of cash and financial strength.
Commercial property insurance is designed to protect all physical assets of your business. This ensures that, in case of any unforeseen circumstances, you can continue your business for a short time while attempting to recover its progress. Investing in commercial property insurance is the smartest thing you can do for your business.
Moreover, your landlord will require your property insurance coverage if you rent a workspace or a piece of land. While the landlord will have the ground ensured, they will not take responsibility for any contents you put into the building once you rent it.
What Does Commercial Property Insurance Cover?
Commercial property insurance for your business will cover the company's physical assets, including the land, the building, and everything in and outside. Commercial property insurance protects essential documents and other people’s property that might be affected by the same tragedy.
In case of a fire, a theft, or a natural disaster, you can rely on your insurance cover to cover the repair or replacement of equipment and machinery.
How Much Does Commercial Property Insurance Cost?
Like any insurance cover, the cost of commercial property insurance will depend on the book value of the business’s assets and the level of risk associated with its operations. Premiums are calculated by multiplying the property's value by a value assigned to the level of risk.
Amid the coronavirus pandemic, commercial property insurance rates in the US have risen. This is mainly due to the increase in natural disasters, the rise in social unrest in the country, and COVID-19 itself.
A report published by Willis Towers Watson about the state of the insurance market in the country says commercial insurance prices will continue to rise through 2021 owing to the systematic changes in risk.
Five crucial factors are considered when commercial property insurance coverage is estimated. These include:
The location of your factory or workplace is one of the most significant factors affecting your insurance premiums. For example, your insurance coverage will be more expensive if the building is in an area prone to natural disasters like earthquakes or floods. This is because insurance costs are directly related to the level of risk involved.
The construction material used in a building greatly determines its safety and security. For example, if you set up your business in an old building made of combustible materials, you will be charged higher premiums.
The cost of your insurance coverage can also vary according to the business activity you carry out on the property. Insurance premiums for an office building are likely to be much lower than for a workshop.
4) Fire Protection
One of the biggest threats to any land or building is fire. Consequently, fire safety is one of the most critical factors that are taken into consideration when calculating insurance premiums. If your business has nearby fire hydrants, fire stations, fire alarms, and sprinklers installed, the insurance premium might cost less.
5) Security Measures
Like fire safety, measures to protect a business against theft are also crucial regarding insurance coverage. Having a reputable security system installed on your property will lower your chances of getting robbed and, thus, will lower your insurance premium.
Does Commercial Property Insurance cover any Legal Risks?
Although commercial property insurance covers repairing and replacing all registered items on your property, it might not cover all of your business’ legal risks.
Any item not attached to the building might not be covered—for example, motor vehicles, outdoor fences, and plants. You might have to get additional coverage for these items if you wish to insure them.
Who Can Get Commercial Property Insurance?
While all businesses should invest in commercial property insurance, some owners are more likely than others to purchase a policy. These include:
- Businesses owning or renting a store, building, or office.
- Businesses owning or renting valuable equipment or tools
- Businesses possessing inventory
- Businesses possessing expensive assets
Depending on the value of the business, its operations, and the amount of risk associated with it, business owners often pair their commercial property insurance with other policies. This ensures maximum coverage and avoids heavy financial losses in an unprecedented event. The table summarizes the different types of business insurance that might be helpful for your business.
|Type of Insurance||What it covers|
|General Liability Insurance||Financial loss from property damage, bodily injury, libel, medical expenses, lawsuits, and slander.|
|Product Liability Insurance||Financial loss from a defective product that might have caused harm or injury.|
|Professional Liability Insurance||Financial loss caused by errors, negligence, and malpractice|
|Business Interruption Insurance||Day-to-day expenses, relocation, and revenue loss for your business while it is shut down to recover from a loss through an insurance claim.|
You can combine one or two of the policies mentioned above with commercial property insurance to provide sufficient protection for your business from significant financial loss. Business Owner’s Policy combines the property and liability aspects of your business and covers claims resulting from both. To achieve more protection, you can also purchase riders to add to your commercial property insurance coverage.
What Is Business Owner’s Policy Insurance?
While multiple business insurance policies are designed to protect your business from financial losses, business owner’s policy insurance combines the most important aspects into one, business property and business liability.
Business owners’ policy has been given their name because they can tailor their policy to meet the business's specific needs. The procedure can be entirely customized according to the needs of the industry and is an excellent policy for protection, especially for small businesses.
You can best benefit from a Business Owner’s Policy Insurance if your business has a physical location, if there is a possibility for your business to be sued, if you have sensitive customer information data and if you have valuable assets that might get damaged or stolen.
What Is An Insurance Rider?
A rider is an additional protection you can acquire from an insurance provider by paying a higher premium. It is, in fact, a slight modification to your insurance policy, which makes it more suitable for your business and negates the need to buy a whole other policy.
Riders are one of the more critical aspects of business insurance because they allow you to customize your insurance plan according to the needs of the business. Business insurance policies, including commercial property and general liability, do not offer such convenience.
There are multiple ways you can use riders to devise an insurance plan that best fits your business. However, policy limits and deductibles are permanently attached to every insurance policy.
|Commercial Property Floater Rider||To cover assets not stored at a fixed location.|
|Coverage for specific types of property||To include property that commercial property insurance does not.|
|Endorsement for workers’ compensation insurance||To extend benefits to employees that are not obligated to be covered.|
|Communicable disease rider||To cover losses caused by infectious diseases.|
What Are Policy Limits?
Policy limits are the coverage cap that insurers place on your insurance policy, deciding the maximum amount they will pay to settle your claim if your business is to suffer a loss. Also known as the limit of liability, the size of these caps is determined by the amount of insurance you purchase.
The limits differ according to the type of insurance. For example, workers’ compensation insurance limits are determined entirely by the loss suffered. There are two types of policy limits.
When an unfortunate incident occurs, and you make a claim, per-occurrence limits determine the maximum amount the insurer will be liable to pay to your business.
Aggregate limits establish the maximum amount an insurer will pay to settle all your claims throughout your policy period.
What Are Deductibles?
An insurance policy, or annual deductible, is the amount you are expected to pay yourself before you claim the insurance agency. This proves as a type of risk-sharing between you and the insurer. You have plenty of options for setting deductibles. If you’re a small, new business and wish to keep your deductibles low, you might be charged a higher premium and vice versa.
How Do I Get Commercial Property Insurance?
Getting your hands on the most suitable insurance cover for your business can seem daunting. You need to keep a plethora of things in mind, including your budget for insurance expenses. However, there are just four broad steps you need to take to secure a suitable policy for your business.
1) Risk Assessment
To estimate how big of an insurance policy your business needs, you should consider all threats it is predisposed to.
These include any possible accidents, natural disasters, and even lawsuits that might cause a loss for the business. This is important if you want to minimize the financial loss resulting from an unprecedented event.
2) Finding An Agent
Once you’ve evaluated the risk associated with your business and its operations, you can start looking for an agent to provide you with a reasonable quote.
Many insurance agents in the market can help you find a policy that best suits your budget and needs. Ensure the agent is licensed and reputable to avoid insurance fraud.
3) Looking Around
When you are in the market looking for an agent, it is essential to take your time and thoroughly compare rates, benefits, and terms for the offers.
Getting in touch with multiple agents simultaneously is an excellent way to quickly get a better look at the market.
4) Re-Assessment On An Annual Basis
The assessment of risk does not only happen once. If, over time, you decide to renovate our office building and install a security system that wasn’t there before, you ought to inform your insurance provider because the reduced level of risk will affect your coverage and premiums.
A qualified insurance agent can guide you through what changes will affect your policy terms.
Are There Any Legal Requirements For Commercial Property Insurance?
Setting up a business takes work. There are many things you have to keep in mind, and never-ending paperwork. Some of this paperwork is for the insurance policies you purchase for the financial protection of your business.
While laws regarding business insurance policies differ from state to state, some insurance covers are mandatory for a business to purchase. These include:
Mandated by the government, workers’ compensation insurance protects workers’ incomes by providing benefits if they suffer a work-related injury or sickness.
- Disability Insurance
Disability Insurance protects the partial income of an employee who cannot work due to a disability. It should be noted that disability insurance does not cover medical expenses, nor is it long-term. It also does not categorize employees over 65 as eligible because they need long-term care.
Unemployment Insurance protects employees’ incomes if they are made redundant. This type of unemployment is through no fault of their own, which is why they are eligible for unemployment benefits from the state. Individual states in the US have different programs, but they all follow the same basics.
While commercial property insurance is not required by law, it is always advisable for business owners to invest in protecting their assets. Acquiring additional coverage beyond what is mandatory can provide your business with financial security and can play a crucial role in determining how resilient your business is.
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Talking about the technicalities of insurance policies, premiums, limits, and claims can make it seem complex. Many business owners hesitate to purchase insurance plans because they don’t completely understand how it works. This is where we come in.
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