Commercial property insurance is meant to protect three things for your business:
- Your building
- Your belongings
- Other people's belongings
If your business owns an office, shop, storage facility, or other type of dwelling, property insurance will compensate you in the event that it is damaged. Damage could come from inclement weather events, fire, vandalism, accidents, or any other hazards named in the policy.
There are, however, some specific perils that your property insurance will not cover:
- Earthquake - Insurance companies offer policies that are specific to earthquake damage, therefore this coverage is not included in your standard property insurance policy. If you are located near a fault line, or if your area has a history of earthquake activity, it would be wise to look into this coverage.
- Flood - Flood damage insurance is administered by the U.S. government (but still sold by insurance companies), specifically FEMA. Depending on whether or not your business is located in a marked floodplain, you may be interested in purchasing a standalone flood policy. Your commercial property insurance policy will not cover any damage caused by a flood.
If your company rents its location as opposed to owns, you may still be responsible for damage to the dwelling depending on your agreement with the property owner. Be sure to read over your lease thoroughly to clarify your obligations in the case of minor or major damage.
Almost all businesses have stuff they use to get the job done. Whether it’s computers, cameras, power tools, desks, chairs, staplers, or surfboards, there are many things in the office that would be expensive to replace if they were damaged in a catastrophe. In the event of a covered loss or theft, your insurance policy will reimburse you for the value of all of your business’s private property.
If your company sells physical items and stores the inventory in-house, your business may be at great risk if that inventory isn’t insured. If a storm comes through and destroys six months worth of stock, you won’t have anything to sell to your customers. In this case, a commercial property insurance policy could be the only thing protecting your business from going under.
An interesting item to note here is that some of your belongings may be considered “part of the dwelling” if they are permanently affixed to floors, walls, ceilings, or other parts of the building. Be sure to discuss these things with your agent when you receive your quote.
Other People's Belongings
Some businesses will temporarily house other people’s items for them. One example is a computer repair company.
A client leaves her laptop at your location to be fixed. Another defective computer’s battery creates a spark, which starts a fire in the tech room. Since your company was in possession of the client’s laptop when it was destroyed, you are liable for the damages. Your property insurance policy will be there to assist in reimbursing the customer for the value of her lost computer.
On average, commercial property insurance for a small business costs between $600 and $1,300 per year for a standalone policy. This number can vary greatly, however, depending on several factors:
- Business location
- Type of dwelling
- Size of dwelling
- Age of dwelling
- Value of belongings
Value Of Belongings
A common question that businesses ask is, “How much is my stuff worth?” There are two different methods that can be used to assign a value to items when it comes time to make a claim:
- Actual Cash Value (ACV) - This method of item valuation takes the amount that an item could sell for on the open market. Example: If your used, two-year-old laptop would sell on eBay for $500, even though you purchased it for $1,500, your policy would only pay out $500. Generally, ACV coverage is less expensive than replacement cost coverage.
- Replacement Cost - This method considers what it would cost to replace your item or dwelling, not just what it would sell for at market. The coverage may be a bit more expensive when purchased, but if you ever have to make a claim, it will be much easier to recover all that was lost with replacement coverage.
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BUSINESS OWNER'S POLICY
Commercial Property Insurance is usually purchased inside of a business owner’s policy (BOP). A BOP is a package of policies usually containing commercial property insurance, general liability insurance, and business interruption insurance.
There are generally some savings when purchasing these policies together, as multi-policy discounts are popular with insurance companies. Chances are good that your company needs general liability insurance and could stand to benefit from business interruption insurance, so be sure to bring up a BOP as an option to your agent when getting a quote.
If your company owns its building or office but has a loan from a bank, you will be required to carry property insurance for the life of the loan.
Even if you pay off your loan and own your property free-and-clear, it is still a very good idea to carry property insurance. If a tragedy occurs and you find your building or belongings have been destroyed, replacing those things could financially devastate your business.
Commercial property insurance may come with a small up-front cost, but if a claim ever needs to be filed, you will find that it is a crucial part of your business’s protection.
Are part-time employees and subcontractors covered by my policy?
In most cases, yes, part-time employees and subcontractors fall under the coverage offered by your professional liability insurance policy. Be sure to clarify that this is in your policy when you get a quote.
Is malpractice insurance considered professional liability?
Yes, professional liability insurance goes by many names, but it is generally the same concept across industries. Other titles may be malpractice, E&O, and professional indemnity.
Are professional liability insurance and general liability insurance the same thing?
No. General liability insurance is a “broad insurance policy” that covers risks like bodily injury and property damage.
Most businesses have a need for general liability insurance, as it lays a great foundation of protection for the company.
Is professional liability included in a business owner’s policy (BOP)?
No. A typical business owner’s policy includes general liability insurance, property insurance, and business interruption insurance. Professional liability insurance would require its own policy.