What is Commercial Property Insurance? And Why Should You Care?

Nov 18, 2021 | Business Insurance

What is Commercial Property Insurance?

Commercial property insurance is a type of insurance that protects your place of business from theft, vandalism, and natural disasters. Whether you own the building, leasing a space, or even if you are working from home, you need this type of insurance for maximum protection. Not only does it protect the building but also the equipment, furniture, tools, inventory, computers, and other business-related possessions.

Coverage

  • Building
  • Fences
  • Outdoor Signs
  • Furniture
  • Fixtures
  • Landscape
  • Computers
  • Records and Documents
  • Lost Income
  • Stocks and Inventory

Types

There are several types of commercial property insurance that you can purchase for your business. Depending on the kind of business you have and the state requirements, you can choose from the following:

Property Insurance

This type of coverage will protect the physical space location from disasters like fire, theft, and flood. It will pay for losses and damages on the insured assets.

General Liability Insurance

General liability insurance is also commercial liability insurance. This is to cover potential medical costs and legal fees if people receive injuries on your property or store space. 

Commercial Auto Insurance

Almost all businesses have some type of vehicle used to operate a company. This type of insurance pays for bodily injury and property damage when operating a company vehicle. 

Business Interruption Insurance

Natural disasters failed technology or the local electric company can interrupt your business anytime. With this coverage, lost income will be recovered or funds will be provided for the continuous operation at another temporary location. 

Workers’ Compensation Insurance

All except for one state require employers to provide workers’ compensation to their employees. Accidents can happen anytime in the workplace and injuries can cost you a lot if you don’t have this type of coverage.  

Errors and Omissions Insurance

E&O insurance or professional liability insurance is to protect your business from lawsuits due to an error or omission not intentionally because of you or your employee. 

Crime Insurance

This type covers theft, fraud, forgery, burglary, and computer fraud. It also covers counterfeit paper currency. 

Cyber Liability Insurance

Businesses are typically prone to data breaches and computer attacks. Clients can sue you if their personal data end up with identity thieves. This type of insurance can help cover legal fees. 

Employment Practices Liability Insurance (EPLI)

EPLI protects you from employee lawsuits. Whether an employee is claiming unfair acts or alleged inappropriate behaviors, legal defense fees and settlement costs are part of the coverage.

Inland Marine Insurance

Coverage for this type includes equipment, machinery, and other properties that are transported overland to an off-site location or property. 

Factors That Determine Premium Cost

We also consider several factors when determining the premium for your business. The value of your business assets is number one on the list. Other factors include:

Location

It is always the location that insurers look at first. The environmental risks will determine the premium cost of your policy. We also consider the local laws of your geographical area.

Construction

How the property is constructed and the materials used to build it are important factors. If you used fire-resistant materials, you can lower your premium. But if you used combustible materials, your premium will definitely go up. 

Age of Building

Older buildings will typically have a higher premium than new ones. The more it is susceptible to damage, the more it will cost you. 

Property Usage

How you use your property or space is also a big factor. A normal office space carries less risk than a restaurant. The kind of inventory kept inside a commercial property or space is also taken into consideration during calculations 

Safety Measures

If your property is equipped with a security system, fire alarm, and sprinklers, you can lower your premium cost. If you are located near a fire hydrant or a fire station, you can also be tagged as a low-risk business

Age of Equipment

You may pay higher premiums if your equipment is hard to repair or hard to replace. If you use a machine often, it is most likely to break down because of heavy use. This can also affect your premium. 

Replacement Cost Vs Actual Cash Value

Just like homeowners’ insurance, commercial property insurance also uses replacement cost and actual cash value to determine how the loss will be calculated. 

Replacement Cost

In replacement cost, the amount to rebuild, replace, or repair damages is calculated with the same or comparable quality without subtracting for depreciation.  For example, the air-conditioning unit of your office conked out. Your insurer will repay you for the value of a new air conditioner of a similar quality no matter how much the current value is. 

Actual Cash Value (ACV)

In actual cash value, your insurer will calculate the amount to be paid by the actual cost minus the depreciation value of your possession. To use the same example above, If the damaged air conditioner was bought for $1,000 three years ago, its value has since depreciated. It may only cost $700 today. Your insurer will only pay you $700 instead of the original price. 

Replacement Cost or Actual Cash Value?

The decision as to which one to purchase would depend on many factors. The number one factor is the cost of premiums. Replacement cost pays more or damage but the premium cost is significantly higher as well. Actual cash value will save you on premiums but will pay less for damages and repairs. 

Why Should You Care For Commercial Property Insurance?

If you are on business properties or renting or a business, you should know the importance of having this type of insurance. It is not mandatory in most states but you will need the protection that this has to offer. You will be able to work better and focus on your business knowing that your business is safe in case of accidents and disasters. 

Advantages

  1. Your business will be more credible. Most companies ants to be in business with other companies that have insurance to make sure that they are protected as well. It builds trust and confidence. 
  2. It protects your employees, especially with workers’ compensation. Your employees are your most valuable assets. Taking good care of them will ensure that they will take care of your business like their own. Giving them the right benefits will help you retain your employees and avoid huge turnarounds. 
  3. Prevents business downfall. If your business is damaged by disasters and you will not be able to continue it elsewhere and rebuild, your commercial property insurance coverage will help you start over and carry on with your business. 
  4. Everyone else may require it. If you are borrowing money from banks and finance companies, they may require insurance. If you lease or rent out your property, you will need insurance. Clients may require insurance before they award you with their business. 

Choosing The Right Provider

For every insurance need you have, it is important that you choose the right provider for your protection. It is the same for your commercial property insurance. You need the right insurer and agent to guide you in choosing the perfect coverage to ensure that your business property and equipment are properly secured. Here are some tips in choosing the right provider:

  1. Shop around and compare rates. The insurer you have right now for your home or car may not be the right one for your business. They may not have the expertise that you need. On the other hand, your current insurer may be able to give you discounts if you purchase your commercial property insurance from them. You can avail of bundled discounts if you are already comfortable with their level of service. 
  2. Check the company’s reputation. Investigate the company you are dealing with before you make a commitment. Look out for reviews and check their track record. 
  3. Check your insurer’s financial stability. This is probably the most important factor that you need to check when choosing your provider. You need to make sure that your insurance company is financially stable for any insurance claims. 
  4. Check the level of customer service. You would want an insurer to be available during the times you need them the most. They should be able to see your needs before you need them. A good insurance agent is someone who can advise you from time to time as your business grows. 
  5. Check the level of expertise. Businesses have different levels of needs. Your insurer must be knowledgeable enough to know the right policy and coverages you need. They should be experts in the field. 

Contact Us

And with that, you should also choose the best independent insurance agent in Denver, Colorado, you can depend on Advantage Insurance Solutions. Our team of expert agents can provide you with the best options for all your insurance needs. You can check out www.teamais.net or call (720) 221-8168.