What Is Commercial Property Insurance?
Commercial property insurance is used to cover any commercial property. Commercial property insurance protects commercial property from such perils as fire, theft, and natural disaster. Avariety of businesses, including manufacturers, retailers, service-oriented businesses, and not-for-profit organizations carry commercial propertyinsurance. It is generally bundled together with other forms of insurance, such as commercial general liability insurance.
Key Takeaways
- Commercial property insurance is insurance used to cover property and equipment from the risk of disasters.
- Different types of properties and equipment are considered for commercial property insurance.
- Several factors, such as location and occupancy, are considered while determining the cost of commercial property insurance.
Understanding Commercial Property Insurance
Commercial property insurance can be a major expense for businesses that use equipment worth millions or billions of dollars, such as railroads and manufacturers. This insurance essentially provides the same kind of protection as property insurance for consumers. However, businesses can usually deduct the cost of commercial property insurance premiums as expenses. Commercial property insurance generally does not cover losses arising from tenants using the building.
When determining how much a company shouldpay for commercial property insurance, the value of a business' assets, including the building, is the primary factor. Before meetingwith an agent to discuss coverage, a companyshould take an inventory of their physicalassets located at their property. This information will helpdetermine what exactly would be thereplacement value and the level of coverage the business shouldget.
With an increase in the number of natural disasters, weather conditions in the area where the building is located have also become an important factor in determining the cost of commercial property insurance. Commercial insurance rates are generally higher for properties located in the vicinity or inside geographies with significant risk of weather-related catastrophes. For example, rates are higher for properties located near regions prone to wildfires in California.
Factors Considered in a Commercial Property Insurance
- Location:Buildings in cities or towns with excellent fire protectiontypically cost less to insure than buildings outside a city or in areas with limited fire protection.
- Construction:Buildings made of potentially combustible materials will have higher premiums, while those made of fire-resistant materials could earn a discount. Additions to an existing structure might affect a fire rating, so it's a good idea to talk to anagent or insurance company before remodeling. Internal structural elements can also change a fire rating. Using wood partitions, floors, and stairways in an otherwise fire-resistant building will likely nullify any rate reduction. Fire-resistant interior walls, floors, and doors can help maintain a good fire rating.
- Occupancy:A building's use also affects its fire rating. An office building will likely rate better than a restaurant or auto repair shop. In a building with multiple tenants, one hazardous occupant will negatively affect the fire rating of the entire building. If abusiness is in a building with a more hazardous tenant,premiums will be higher.
- Fire and theft protection:How far are the nearest fire hydrant and fire station? Does thebusiness have a fire alarm andsprinkler system? How about a security system?
Property to ConsiderforCommercial PropertyInsurance
Some particular places on your property to consider insuring include:
- The building that houses your business, including if it is owned or rented
- All office equipment, including computers, phone systems, and furniture, whether they're owned or leased
- Accounting records and essential company documents
- Manufacturing or processing equipment
- Inventory kept in stock
- Fence and landscaping
- Signs and satellite dishes
Examples of Commercial Property Insurance
Commercial property insurance can be used to cover a variety of situations. For example, it can be used to claim damages if a fire destroys your office equipment. Commercial property insurance is also useful in case of a theft. It can also be used to make claims in case of a natural disaster. For example, Insurance Journal reported that Hurricane Maria's impact in Puerto Rico left insurers dealing with 279,000 claims.
FAQs
Commercial Property Insurance
Property insurance covers the building structure itself, as well as business property such as equipment, inventory, furniture, and more. Covered perils in a property insurance policy usually include losses from fire, storms, theft, burglary, or vandalism.
How do you explain commercial insurance? ›
Commercial insurance refers to insurance coverage intended for businesses instead of individuals. Commercial insurance is also called business insurance. Business insurance covers losses related to unexpected events like lawsuits, accidents, or natural disasters, among others.
What is covered under a commercial property insurance policy? ›
Commercial insurance can protect you from some of the most common losses experienced by business owners such as property damage, business interruption, theft, liability, and worker injury.
How do you explain property insurance? ›
Property insurance refers to a series of policies that offer property protection, including structural damage, theft of personal belongings, and liability coverage. Property insurance can include homeowners insurance, renters insurance, flood insurance, and earthquake insurance.
What is the standard deductible in a commercial property policy? ›
Most commercial property insurance policies have deductibles ranging from $1,000 to $25,000. The deductible is the part of a claim that the business has to pay before the insurance starts covering the rest. If you choose a higher deductible, you'll pay less for your insurance each month.
Which is an example of a commercial property? ›
Commercial property includes office buildings, medical centers, hotels, malls, retail stores, multifamily housing buildings, farm land, warehouses, and garages. In many U.S. states, residential property containing more than a certain number of units qualifies as commercial property for borrowing and tax purposes.
How to be successful in commercial insurance? ›
Below are some of the characteristics a successful insurance agent needs to complete their puzzle:
- People Skills. People skills are the number one characteristic of a successful insurance agent. ...
- Good Salesmanship. ...
- Customer Service Skills. ...
- High Energy Level. ...
- Honesty. ...
- Knowledge on a Variety of Products. ...
- Choose the Right Carrier.
Two of the most common types of commercial health insurance plans are the preferred provider organization (PPO) and health maintenance organization (HMO). Most commercial health insurance comes in the form of group coverage, offered by employers.
What is not covered by property insurance? ›
Many things that aren't covered under your standard policy typically result from neglect and a failure to properly maintain the property. Termites and insect damage, bird or rodent damage, rust, rot, mold, and general wear and tear are not covered.
What is not covered in a commercial package policy? ›
Commercial package policies can't include certain items like workers' compensation or directors-and-officers insurance. Workers' compensation insurance is required by law and must be purchased as a separate policy. Directors-and-officers policies are necessary for non-profit organizations.
These refer to the obligations and rights of the insurance company and the insured. Common conditions apply to every type of coverage on a CPP. This includes Examination of Books and Records, Transfer of Rights and Duties, Cancellation, Policy Changes, and Premiums.
What is insurance easy way to explain? ›
An insurance policy is a legal contract between the insurance company (the insurer) and the person(s), business, or entity being insured (the insured). Reading your policy helps you verify that the policy meets your needs and that you understand your and the insurance company's responsibilities if a loss occurs.
What is insurance in a simple way? ›
What is insurance? Insurance is a way to manage your risk. When you buy insurance, you purchase protection against unexpected financial losses. The insurance company pays you or someone you choose if something bad happens to you.
Why do businesses need property insurance? ›
Business property insurance covers your buildings, the contents within those buildings, and loss of income if you're out of business due to a claim. It can help protect your business in case of unexpected accidents or tragedies like fire, theft, wind damage, or even a building's collapse under the weight of snow.
Is commercial property insurance the same as general liability insurance? ›
In short: Commercial property insurance can help cover the things your business owns. Liability insurance can help cover expenses if you are at fault for an injury with the people you interact with (excluding employees) or damage to property you don't own.
Why is commercial property insurance so expensive? ›
The continued impact of catastrophic events is a major factor driving up costs, along with the increasing cost of capital, financial market volatility and inflation. This is an expense carriers need to pass along to customers.
What is property insurance and why does a business need it? ›
Business property insurance covers your buildings, the contents within those buildings, and loss of income if you're out of business due to a claim. It can help protect your business in case of unexpected accidents or tragedies like fire, theft, wind damage, or even a building's collapse under the weight of snow.
What if a building insured with commercial property insurance has been vacant 60 days? ›
If a building insured under a commercial property policy was vacant for 60 days, certain perils that are commonly excluded from coverage due to vacancy may include vandalism, sprinkler leakage (unless you have protected the system against freezing), building glass breakage, water damage, theft, and any attempted theft.
