Commercial Property

Commercial Property Insurance

Commercial property business insurance is priority #1 to protect the future of your business and the substantial investments and assets involved with your operations.  Whether you own your building, lease your premises or work from home, commercial property insurance can be tailored to protect all your physical assets against loss or damage from a variety of causes including fire, theft, smoke, water and vandalism.

If you are renting your business space, a general property insurance policy provides coverage for your equipment, furniture, valuable documents, inventory, outdoor signage, and other real and personal property owned by your business. (Most leases require some type of business property insurance.)

Commercial property insurance also protects you as a renter—against law suits that could arise due to something you are alleged to have done, or not done and should have, that damages the building you rent.

Business property insurance is becoming an increasingly more important type of coverage as more frequently complainants are turning to the legal system to settle business conflicts. In this regard, business property insurance protects your business in that your legal costs would be covered to defend it against insurable allegations.

Types of Commercial Property Insurance

There are two types of business property insurance policies: 1) “Named Perils,” and 2) “All Risks.”

Named Perils Policy:  Provides protection for specific events such as fire, smoke, windstorm, hail, vandalism, or sprinkler leakage. The policy only covers those events named in the policy and is usually less expensive because it provides limited coverage.

All Risks Policy:  An “All Risks” policy does not mean that all losses will be covered. Rather, it provides protection for any loss by perils not specifically listed as exclusions in the policy. Common exclusions in an “All Risks” policy include:  earthquake, flood, wear and tear, illegally acquired property, etc. However, you can add numerous riders and endorsements to your policy to add coverage such as:  earthquake, etc.

How Property Losses Are Determined

Property insurance can either be purchased on a “replacement cost” basis or an “actual cash value” basis.

Replacement Cost:  Is the amount it would take to replace or rebuild your business, or the damaged part of it, with materials of like kind and quality, without deducting any depreciation. Replacement cost does not include the value of your land.

Actual Cash Value:  Is the amount it would take to repair or replace the damaged or stolen property after deducting for depreciation.

N.B. Whether your business is insured for replacement value or actual cash value, it is important to review the value of your property on a regular basis. Inflation tends to increase the replacement cost of your property, while the actual cash value may decrease over time. The value of your property can be determined by using the original construction costs, regional construction costs guidelines, or by hiring a professional appraiser.

Also, if your property contains valuable items such as fine arts, accounts receivable, or valuable papers and records, you may need to buy additional protection to cover these specific items.

Bundling of coverage needs under a “package policy” provides many of the coverage enhancements required for full protection on all insurable exposures thereby avoiding gaps in essential coverage.  The package policy concept leads to the best coverage for the price – a winning combination.

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