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Do you need commercial property insurance?
Most companies that own or rent a workspace or operate out of their house will need commercial property insurance. It also provides coverage for tools, equipment, and other property used during the course of business.
Nearly all lenders require continuous property insurance coverage for the length of your mortgage and landlords frequently ask for proof of insurance before signing a lease contract. Even in cases where commercial property insurance isn’t required by your financial contract, it’s a vital insurance policy for small businesses as it covers many expensive assets.
How much commercial property insurance do I need? Can it be customized?
This depends on what types of risks your property might face due to either location or industry. Many commercial property insurance policies can be expanded to include endorsements or supplementary coverage.
The basic commercial property policy insures certain risks to your fixed property location and the equipment inside. This can be customized to add protection from events like:
Many small businesses can save money by combining their commercial property insurance with general liability insurance in a package called a business owner’s policy (BOP). This bundle can possibly lower rates for businesses that qualify when compared to purchasing these common policies separately.
What does commercial property insurance cover?
Commercial property insurance pays for the repair or replacement of damaged, destroyed, or stolen business-owned assets. These assets include owned property, supplies, equipment, furniture and fixtures, and inventory.
Company-owned buildings and property
If your business owns office buildings, a retail shop, warehouse, or any other type of property, commercial property insurance will cover those buildings from damage or destruction.
For example, if old wiring causes an electrical fire that spreads through your property and destroys your retail shop, this insurance policy will cover the repair of the retail space, the inventory, and other business-owned property.
Supplies and equipment
Most businesses maintain supplies and equipment on their premises to run their operation. These can be anything from basic office supplies to electronics. Commercial property insurance will typically replace supplies or equipment that are stolen, lost, or damaged.
For example, if a robber breaks into your business and steals multiple computers, commercial property insurance will pay for them to be replaced.
Furniture and fixtures
Commercial property insurance will cover damage to furnishings like desks, chairs, and cabinets, as well as permanent building fixtures like shelving, lighting, and ventilation.
For example, if a water pipe bursts in the office and damages couches and chairs in the waiting room, commercial property insurance will cover the damage to that furniture.
When inventory is stored at your place of business, it is covered by commercial property insurance.
For example, if your manufacturing product inventory is stored in your warehouse and it burns to the ground, commercial property insurance will cover the replacement of the lost inventory.
What does commercial property insurance NOT cover?
It’s important to realize that commercial property insurance will not cover all types of property damage or issues that occur due to damaged property. Some situations property insurance won’t typically cover include damage to business property in transit, damage to customer property, equipment that malfunctions, costs incurred due to business interruption, theft by employees, and destroyed customer records (accounts receivable).
There are coverage endorsements available for items that are excluded from a standard insurance policy. Some common add-on coverages are:
Property in transit
If business property is being moved anywhere except within your property, it is considered in transit. There are coverage endorsements available for businesses that infrequently move property or equipment. For businesses with extensive property in transit needs, they may need to purchase an Inland marine insurance policy.
For example, a contractor transports a truck full of tools to a job site where they’re working and some of the tools fall out of the truck and are damaged, a property in transit insurance policy endorsement, or an inland marine insurance policy would pay for the tools to be replaced.
When a customer’s property is damaged while under your custody or control, it is not covered by your business property insurance policy. There are endorsements that can be added to your commercial property insurance policy to offer protection for this exposure.
For example, your dry-cleaning business is cleaning a customer’s suits and there is a fire resulting in damage to the clothing. The commercial property insurance policy will cover the loss.
At times, essential equipment will stop working due to failures that are out of a business owner’s control. If mechanical or electrical failures cause equipment to malfunction, a company with equipment breakdown insurance coverage or an endorsement added to the commercial property insurance policy could be reimbursed for the repair cost.
For example, if the grill at a restaurant is damaged due to a power surge, commercial property insurance policy won’t cover the cost of repair unless the commercial property insurance policy has additional equipment breakdown coverage or an endorsement adding the coverage.
If an emergency setback forces your business to close temporarily, commercial property insurance will not cover lost revenue. A business interruption insurance policy would help pay for lost revenue, overhead expenses, or temporary location costs.
For example, if a fire causes damage to a car dealership and they’re forced to close during renovations, a commercial property insurance policy will cover the repair costs, but the dealership will need business interruption if they want to recoup lost income or temporary operation expenses during the downtime.
Despite doing your best to hire the best, employee theft does occasionally happen. In these cases, your business would benefit from an employee theft endorsement to the standard insurance coverage to pay for theft reimbursement. This endorsement covers embezzlement, forgery, fraud, and theft from your business.
For example, if an employee is caught using a company credit card for unapproved personal purchases, the employee theft endorsement will cover reimbursement for those purchases upon discovery.
Customer invoices (accounts receivable)
Commercial property insurance will not cover destroyed customer invoices. However, coverage can be extended to include an accounts receivable endorsement to help pay the cost of recovering the lost payments.
For example, if a water leak causes a fuel dealer’s bill record-keeping system to be destroyed, commercial property insurance will cover the cost to replace the computers and filing cabinets. It will not cover the cost to hire an accountant to determine which customers have outstanding bills unless the commercial property insurance policy has an accounts receivable endorsement.
How much does commercial property insurance cost?
There are a couple of factors that influence the cost of a commercial property insurance policy. These aspects include:
Geography will determine critical risk factors like environmental threats and local crime rates. Places with more extreme weather or high crime will see higher premiums.
Size of property
The larger the building is that your business operates in, the more it will cost to insure because of its greater value. A large warehouse will almost always cost more to insure than a single office space.
Age of property
Older properties can cost more to insure since they are more likely to experience certain types of damages. Sometimes key updates to older properties can help keep commercial property insurance rates lower.
Rates can be affected by what goes on inside your property. Businesses that operate in riskier industries like toxic material handling or manufacturing will often have higher rates.
A business with large amounts of industrial equipment will cost more to insure. The value of equipment increases the overall insured value of the property.
High-quality alarms and sprinkler systems can help reduce premiums. Some uncontrollable factors like proximity to the nearest fire hydrant or fire station might also reduce a premium.
Property valuation method
There are two measures of value that are typically used for commercial property insurance: replacement value and actual cash value. If your commercial property insurance policy uses the replacement valuation, it will have higher rates because it covers the cost of a completely new item, while actual cash value only pays for the items’ depreciated value, which generally results in a lower rate.
Though rates are typically more expensive, it is a safer choice to use the replacement valuation in your commercial property insurance policy. If a loss does happen, replacement valuation will make sure you receive full compensation for your damaged assets.
Types of hazards
Commercial property insurance policies can either cover open perils or named perils. An open peril policy covers all hazards except for those excluded within the policy. Named perils only protect against hazards explicitly named within the policy. This makes open peril policies more expensive because they offer far more coverage.
How do I make a commercial property insurance claim?
Most carriers have online claim reporting capabilities, or you can call their toll-free claims reporting phone number. At Winooski insurance, we are available to provide information about the claim reporting process. Our clients can rest easy knowing our experienced agents are ready to help when needed.
View a list of our partner carriers and instructions on where to file a claim with each.
Why should I get commercial property insurance through an independent agency?
Winooski Insurance has been an independent insurance agency for almost 40-years. During this time, we have created long-term relationships with a multitude of insurance partners which allows us to present you with a broad range of coverage options at competitive rates. We’re committed to helping you address your unique requirements.
“ The level of service and professionalism I’ve received from Jeff and the experienced professionals at Winooski Insurance is unparalleled. I’m grateful to have been referred to Winooski Insurance and truly feel like I have a business partner, not just an insurance company. ”
Cherian Philip, CFO
“ The entire team at Winooski Insurance have done an outstanding job of providing insurance coverage for my company. This is not always easy, as each project has to be reviewed by Winooski Insurance to verify that we have the required coverages. ”
David Bogue, President
Professional Construction Inc.
“ I have personally and professionally used Winooski Insurance for over 15 years. The staff is efficient, the service is excellent, and they work hard to keep the premiums low. I highly recommend Winooski Insurance! ”
Mark Chaffee, Senior Loan Officer
Draper and Kramer Mortgage Corp.