What is Commercial Property Insurance and why should you care!
As the names suggest, commercial property insurance is used to cover any type of a commercial property from such perils as theft, natural disaster, community acts such as vandalism, and other unwanted situations. A Large fleet of industries like manufacturers, retailers, service oriented businesses, and NGOs hold commercial property insurance for their firm’s protection.
Similar to many other insurance policies commercial property insurance is a combined form of a policy that brings together many other insurance such as commercial general ability insurance in one single, feasible insurance policy. The risk of disasters to the property or equipment of your business premises all are covered under the policy.
General understanding of the Commercial Property Insurance
All the businesses that hold millions or billions of dollars worth of equipment and machinery in their commercial premises can get majorly benefited by the commercial property insurance. The majority of you might be aware of the benefits provided by the property insurance to the consumers, commercial property insurance works the same for big or small-sized businesses to provide them the same kind of protection in tough times.
The value of business’ assets including the commercial building are the deciding factors when determining the cost of the commercial property insurance a business owner must pay. And therefore, the first step you have to take to acquire the commercial property insurance is to take an inventory of your physical assets located at the property and then go to an agent to discuss the coverages of the insurance policy.
The cost factor of the policy is also affected by the weather conditions of the area where your premises or enterprise is located. The properties located in the vicinity or inside of the geography are at significant risk of catastrophic or calamities are generally higher in commercial insurance rates. One such example is California which has higher rates for the policies due to the region being prone to wildfires.
What is the scope of the commercial property insurance policy?
Let’s look at the coverages under commercial property insurance to understand the prospects more clearly and to learn why one must avail such policy to benefit their commercial space from unexpected dangers.
- Robbery and theft.
The everyday rise in competition has made the commercial world more dangerous and scary than ever. Even with a number of safety measures, advanced technical locks and safes, you can never be sure if your office is secured at night time or during the holidays. Have you ever considered a fact that what might happen if a rival plan to attack your office to steal the important deal documents or what if a crowd of people protesting for the local rights attack your office, break the furniture shatter all the glass windows and machines leaving your office in a non functional state and you in a mental dilemma?
You can never be sure of when these situations are going to happen and therefore, preventing such unwanted disasters can never be done securely. This is why you need commercial property insurance that will cover all the property damage and will reimburse you for the financial loss that you will have to pay from your pocket otherwise.
- Natural disasters.
Let’s suppose you own a hardware store or an electrical repair shop in a low-lying area. Due to the heavy rainfall for a continuous number of days and poor drainage system, the rainfall leads the water to seep through the roads and enter your shop leading to damage to some electrical items that cannot be repaired. The damaged items may belong to the trusted customers to home you will have to pay for the loss as well. Being a small business owner you might not have the financial strength to bear the spendings by your own and that is why you need a commercial property insurance coverage.
The compensation of the damage items of your clients as well as of the property dam is will be covered under the property insurance eliminating your stress and burden to pay it all by yourself.
Safety precautions can never be sufficient. Imagine a group of stray dogs fighting, breaking the outer fence of your commercial building or a herd of wild animals breaking the glass door or windows of your premises. Your enterprise can also be attacked by an act of vandalism. A quite unlikely situation where a collision with a vehicle or even airplane can completely dismantle your office building within minutes. This is enough of the reasons why you should consider buying a commercial property insurance policy that will help you in such tough times by covering all the damages and disasters that can lead you to financial debt.
- Third-party liability.
There are hardly any chances that you will not face any problematic situation where you will be lying at fault. Even after you take full precautionary measures, any minor mistake by you or your employees at the workplace might harm the third party who is likely a customer or the by-standers which can cause them to file a lawsuit against your business. The cost of the lawsuit and the reimbursement amount that you will have to pay to the individuals you have caused harm to, can be high enough to disturb your budget, shattering your financial stability.
To protect yourself, commercial property insurance can be a great help which will cover all the damages, compensating at all steps including the cost you have to pay as the liability fees to the third party.
Cost determining factors for commercial property insurance
- Location of the commercial property. Commercial buildings located in the cities or towns with excellent facilities and easily accessible protection measures typically cost less for the insurance policy compared to the buildings located outside the cities in the suburb areas with limited supplies available.
- Constructional changes. The buildings made of fire-resistant materials could land a premium discount whereas, buildings that are not fireproof or are made of potentially combustible materials will have to pay higher for their premiums or coverages. The prices of the commercial property insurance may also get affected with the addition in the structural elements of the building of the premises. The use of partition, stairways, floors in a fire-resistant building are also likely to nullify the cost reduction. Whereas, the resistant interior walls, doors, floors, etc. can help maintain a good fire rating and therefore, it is advisable to discuss everything with an insurance agent or insurance company before considering remodeling of the premises.
- Occupancy of the building. The cost of the commercial property insurance is also affected by the occupancy or the use of the building. Where the office building is likely to rate better and cheaper in the cost for the insurance policy, a restaurant or an auto repair shop on the other hand, with multiple tenants and hazardous occupant will negatively affect the fire rating eventually the commercial property insurance policy leading to the higher premiums.
What is the cost range for commercial property insurance?
Nothing in particular can be said as the fixed amount of the insurance policy as the cost varies due to several factors. However, a general sum can lie somewhere around $60 per month or $800 a year. One thing about commercial property insurance is that the eligibility criteria does not demand you to own a property to get the insurance policy. Even if you own a rented office space or equipment and machineries, you are eligible to get them securely covered under an insurance policy.
The business’ property and assets are always the deciding factor of the cost of the commercial property insurance. That means, if you are operating your small business from your own home then you are likely to pay less than someone who has a dedicated commercial premises for their business operations.
How to obtain commercial property insurance?
Being a small business owner and dealing with major accidents such as a burst pipe, bad weather causing harm to the expensive equipment, or false acquisitions and claims made by a rival or a third-party, can adversely affect your financial security and threaten your position in the market.
Fortunately, commercial property insurance can be your friend in need covering all the major accidents and specific requirements of your business needs. Given below are some things to keep in mind while buying commercial property insurance.
- Include your commercial property insurance in the BOP.
Being a small business owner you have an advantage to buy your property insurance as an inclusive part of a business owners policy also known as BOP. A BOP combines policies like general liability insurance, business interruption convergence, and commercial property insurance in one single policy that costs the business owners cheaper than buying every coverage separately.
- General liability insurance protects the business from a number of claims such as third-party bodily injury, property damage, reputational harm, copyright violation, advertising injury, etc. All the legal cost and compensation is covered by the insurance company if any situation arises where your business is held against for any mentioned above issues.
- Business interruptions insurance helps a business in recovering the lost capital and income due to the occurrence of any unwanted mishap. Let’s suppose your business premises encountered hindrance due to the fire, flood or windstorm. All the capital damage that has been done including the loss of income you could have made in the missed days are reimbursed by the insurance company so that your financial footing does not get affected.
Commercial property insurance can be classified as of two types:
- Replacement cost coverage, that will cover the rebuilding or replacing cost of your business property using the material of same or comparable value. No deduction of depreciation is involved in such cost coverage.
- Actually cash value coverage, under which the payment of the present-day is made for the items that are damaged due to any reason. This type of cost takes into consideration the depreciation which means that you will be required to pay the difference to cover the replacement of the lost items. However, your monthly insurance bill can be reduced due to having an actual cash value coverage.
Some properties that are not covered under the commercial property insurance
It is important to understand where commercial property insurance might not be helpful for your business. Some of the cases are mentioned below:
- If you or one of your employees is caught up in an accident while driving the company’s vehicle, such a compensation will not be covered by the commercial property insurance instead it will come under the umbrella of commercial auto insurance.
- Damages caused by flooding will not be covered by the commercial insurance policy, but you will be required to buy a separate flood insurance for the protection of your office space from flood damage.
- The damage done by you or by your clients on a third-party’s property will be covered under the general liability insurance and not by the commercial property insurance policy.
Commercial coverage plus
Similar to all the damages that might occur to your business if you do not consider a commercial property insurance, you can suffer a hefty damage or loss on buying a property insurance that does not meet your business requirements or contains too many specifics that are not even needed for your business maintenance.
This is why experts at Commercial coverage plus learn about your needs and requirements to tailor the best policy that fits your perfect needs. If you have any query related to the insurance policy feel free to contact them and learn more about the same.