The moment when you finally lease a new office space is richly rewarding and exciting. Your business is a credit to you and all of your hard work. In order to protect your business and your business space, you’ll want to look into commercial property insurance. That way, if the worst should happen, your business will be protected. Below, we’ll talk about what commercial property insurance is, what it covers, how much it costs, and where you can find it.
- What is Commercial Property Insurance?
- What does Commercial Property Insurance Cover?
- What doesn’t Commercial Property Insurance Cover?
- How Much does Commercial Property Insurance Cost?
- What Benefits Should You Consider for Commercial Property Insurance?
- Compare Commercial Property Insurance Quotes through Digital Brokers
What is Commercial Property Insurance?
Commercial property insurance protects your business from losses due to fire, theft, vandalism or natural disasters. It can help keep your business open in such events. They can also protect you against loss of income due to property damage. For example, if you live in California and your business suffered a loss during the California wildfires, commercial property insurance should cover your business losses, property, and income.
What does Commercial Property Insurance Cover?
Although it varies from policy to policy, Commercial property insurance protects everything your business needs to run. It will pay to cover equipment that is lost, stolen, or damaged. Typically, that includes:
- Your building: This can mean both the actual structure and the fixtures, machinery, and equipment.
- Contents of the building: Everything else. This includes anything like laptops, office supplies, printers, etc.
- Other people’s property: Anything left in your care.
- Data breaches and hacks
There are three types of commercial insurance coverage.
- Basic form policy: Covers natural disasters, fire, smoke, vandalism and theft.
- Broad form policy: Covers everything the basic policy covers, plus protection from falling objects, the weight of snow or ice, water damage, and collapsing structures
- Special Form policy: If you need flood or earthquake insurance, you can include it here.
What doesn’t Commercial Property Insurance Cover?
- Property that isn’t at your place of business. If you have a business where you have to move equipment around in order to do your job, such as a cleaning business, you’ll need Inland Marine insurance to cover your property while it’s at someone else’s property or in transit.
- Terrorist attacks
- Theft by one of your employees.
How Much does Commercial Property Insurance Cost?
According to a 2017 study by Howmuch.net, a small business owner might pay as little as $500 a year for commercial property insurance, whereas a major corporation will pay $500,000 or more.
The average business owner pays between $1,000 and $3,000 annually for commercial property insurance.
Commercial property rates vary due to things like:
- Construction: How old is the building where your business is located? Does it have an updated fire alarm system? What year was the HVAC installed?
- Occupancy: Who occupies your building during office hours? If your office is in a building with higher foot traffic, you’ll pay more because more people = more risks.
- Location: Where is your building located? Is it in a high-crime area? Is it in an area prone to flooding?
- Protection: If the building has sprinkler systems or an updated alarm system, this can reduce your rates.
- Age of your equipment
- Replacement value vs. actual cash value. Replacement value covers the cost of buying new equipment, but the policies are more expensive.
- Amount of insurance
What Benefits Should You Consider for Commercial Property Insurance?
You’ll first need to figure out how much commercial property insurance you need. You’ll want to look at the building that houses your business. Even if you only lease the space, you still want commercial property insurance if the space is vital to the running of your business. Otherwise, none of your assets will be insured. For example, say you rent a space for a small bakery in a downtown office building. The building goes up in flames. The landlord has commercial property insurance, so he would be covered for the cost of the building. You, however, would suffer the loss of the space and everything in it without commercial property insurance.
You’ll need to consider whether you want replacement value coverage or actual value coverage. Replacement value coverage pays to replace your item with a brand new item, but the cost of the insurance is higher. Actual value just replaces whatever the item is currently worth.
You should consider adding flood or earthquake to your policy if your business is in an area that is prone to it. Keep in mind major flooding can happen even if you don’t live in a flood zone, such as during Hurricane Florence in 2018, flooding the Carolinas when they got 36 inches of rain.
When you get commercial property insurance, be sure to keep an eye on your indemnity period. This is how much time you have to file a claim after a loss, beginning the date the loss occurred.
Commercial property insurance may protect you in the case of a tenant lawsuit, if you are a property manager or otherwise rent space to others.
If you’re a small business owner, you will be happy that commercial liability insurance is tax deductible.
Compare Commercial Property Insurance Quotes through Digital Brokers
Instead of going from website to website, you could go to a digital broker and enter your information once and then get quotes from several insurance companies.
Coverhound took our information on our hypothetical bakery and gave us one quote, from Liberty Mutual for a Business Owners Policy (which includes commercial property) for $550 a year or $45.84 a month. This was with a zero deductible and $1,000,000 general liability limit. This is pretty interesting since Liberty Mutual doesn’t offer quotes online to their customers. However, they do offer it through digital brokers like Coverhound.
Coverwallet also asked us about our building, and also some other questions no one else had asked:
- Do you have business operations and/or locations that are not included in this insurance application?
- Has your business had any gaps in insurance coverage for the past three years?
- Do you derive more than 20% of sales from catering?
- Is your business open past 1:00 a.m.?
- Do you have valet cars?
- Has your business received notice of any violations or fines from any government agency in the last three years?
They also wanted to know if our cooking equipment was cleaned and maintained regularly. After all this, they said they were not able to provide us with an online quote but they would be happy to help us if we called them.
Below are a few FAQs about Commercial Property Insurance
1. Should I combine commercial property insurance with general liability insurance?
If you can, you should. This is called a Business Owners Policy and it offers the protection of both types of insurance at a rate lower than if you were to buy the policies separately.
2. How can I reduce the costs of commercial property insurance?
Insurance companies like to see a building newer than fifty years. If your building is older than this, you can make sure the roof, the HVAC, plumbing and electrical systems have all been updated. Having fire safety equipment and a security system will also save you money. Some insurance companies will go over your business with you and make recommendations on how you can make your office space safer.
3. Is commercial property insurance required by law?
No, but if you lease or rent a space from a landlord, the landlord may require you to have it. Read your lease carefully.
4. What is Business Interruption Insurance? And do I still need it in addition to Commercial Property Insurance?
In the event some catastrophe happens and your business is forced to close temporarily, business interruption insurance will help reimburse you for lost income and get you back on your feet.
Commercial Property Insurance and Business Interruption Insurance are complimenting each other. For example, if your business is closed due to fire. Commercial Property Insurance will cover the damages of the building and other equipment caused by the fire whereas Business Interruption Insurance will cover the lost income during the period when your business is closed. That’s the reason why for small businesses of annual income of less than $1 million, commercial property insurance, general liability insurance, and business interruption insurance are combined into one single policy, called Business Owners Policy (BOP).