What is Commercial Property Insurance?

Commercial Property Insurance helps cover your business's physical assets against any damage or loss that might happen to them. This could be due to damage from fires, theft, storms, or other common hazards.

What is covered depends on your policy, premium and insurer.

Commercial property insurance is just a safety net for businesses. Just as you'd protect your home with homeowners' insurance, this kind of policy is designed to protect the physical assets of your business.

What is covered?

Generally, it covers:

• Buildings: The physical structures where your business operates.
• Contents: This includes machinery, furniture, inventory, and equipment.
• Outdoor Fixtures: Things like signs, outdoor furniture, and fencing.
• Leased Assets: If you've rented equipment or tools, they can also be covered.

However, this is entirely dependent on your specific policy.

The importance of chosing the right policy is therefore extremely important.

Each business is unique. Whether you're running a bookstore, a self-storage company, or a logistics warehouse, your needs will differ. It's essential to assess your business's risks and assets and design a policy that matches.

That's where the right commercial property insurance broker can help. Choosing a partner that understands the specific ins-and-outs of your industry means that they will design you the right cover - specifically tailored to your business, at the right price.

What does commercial property insurance cover?

There is no straight answer to this! The only correct answer is: It depends on your policy!

As a business owner, you need to work with your commercial insurance broker to strike the right balance between comprehensive coverage and budget considerations.

It's a tricky balance of evaluating risks versus premium, ensuring you're neither over-insured nor vulnerable to unforeseen events.

The general equation to remember is: The more coverage, the less risk. The more coverage, the higher your monthly premium.

In general though, here's what might be included in your commercial property insurance cover:

Physical Structures and Buildings

The most immediate thing that might come to mind when thinking about Commercial Property Insurance is the coverage of physical structures. Whether it's a storefront, a warehouse, or an office building, this insurance helps protect the places where business happens.

Business Personal Property

Beyond the bricks and mortar, the assets inside your business need protection too. This includes:

• Furniture: Desks, chairs, and shelves.
• Machinery and Equipment: This can range from coffee machines to high-tech manufacturing equipment.
• Inventory: All the products or goods that are waiting to be sold.
• Electronics: Computers, servers, and point of sale systems.

Outdoor and Exterior Items

The space outside your main business structure is significant too. Commercial Property Insurance can cover:

• Signage: Especially if it's essential for attracting customers.
• Fencing and Landscaping: Trees, shrubs, and fences that enhance your property's aesthetic.

Specialty Items and Additional Coverages

Every business is unique, and you might have specific assets that don't fit neatly into standard categories. These can often be covered with specialty endorsements. Additionally, while the main focus is on physical assets, many policies offer extensions like:

• Business Interruption: Compensation for lost income if your business can't operate due to a covered event.
• Valuable Papers Coverage: Protection for essential documents like blueprints or contracts.
• Electronic Data: Coverage for losses related to digital assets, such as customer databases.

It's essential to remember that not every policy will automatically cover all the mentioned elements. It's always a good idea to discuss with a reputable commercial insurance professional to ensure you're adequately covered for what's most crucial to your business.

How much does commercial property insurance cost?

Again, there is no straight answer to this! The only correct answer is: It depends on a few things!

We'll try give you some cost estimates, and also an indication of what affects the price of your premium.

Ballpark Estimates

While the range can be vast, small businesses might expect to pay anywhere from $720 to $6,000 annually for basic commercial property insurance coverage.

That equates to roughly $60/mo to $500/mo for the average small business owner.

Commercial real estate is also a particularly expensive industry where the monthly prices can sometimes be closer to $420 to $500 USD per month.

Costs are Rising

There's no escaping it, the cost of commercial real estate insurance is on the rise.

Simply, this is due to an aggregate increase in the amount of loss being incurred in the global insurance industry.

As you can see in the data below from Marsh, the average annual global insured loss has increased by a factor of 1.6 in the period from 2017 to 2022, when compared to the trailing 4-year period.

That loss is simply being passed on to the business owner.

Factors Affecting Cost

Several elements come into play when determining the price of your commercial property insurance:

• Location: A business in an area prone to natural disasters, like hurricanes or floods, might face higher premiums.
• Building Construction: Modern buildings with fire-resistant materials might be cheaper to insure than older structures.
• Occupancy: A manufacturing unit has different risks compared to a retail store or an office space.
• Fire and Theft Protection: Proximity to fire stations, the presence of sprinkler systems, and security measures can influence rates.
• Property Value: The value of the building and its contents, including equipment and inventory, directly impacts the cost.
• Claims History: Businesses with frequent insurance claims might face higher premiums.
• Industry: Some businesses are more asset-heavy than others. Real estate is perhaps the most asset-heavy and therefore that is where the most protection is required.

Striking a Balance

It's tempting to opt for the cheapest policy available, but it's crucial to ensure you're adequately covered. A low premium might mean higher deductibles or gaps in coverage. Conversely, over-insuring can lead to unnecessary costs. It's all about finding the sweet spot tailored to your business's unique needs and risks.

This is where your in

Comparing Your Options

Finding the right price for your business comes down to being able to make an informed choice.

Being able to sit down with your broker, compare prices, coverage and excess from multiple providers will give you an advantage in terms of being well-informed, and also bargaining power.

Make sure you are working with a broker who presents you with multiple options, and shops around with multiple providers for quotes.

The Different Types of Cover Available

When exploring your commercial property insurance options, understanding the different types of coverage available gives you the context you need to be able to ask the right questions of your broker.

Here are some of them.

Basic Form Policies

A basic form policy provides coverage against a specified list of perils or events. If it's not listed in the policy, it's not covered.

These are the most straightforward policies, often covering standard risks:

• Fire and lightning
• Windstorms and hail
• Smoke damage
• Vandalism and malicious mischief
• Explosions

This policy form is "basic" because it offers protection against the most common risks but doesn't delve into the more extensive range of potential problems a business might face.

Broad Form Policies

A broad form policy covers all the perils included in the basic form and then adds several more. It offers more comprehensive protection. In addition to the basic form events, it also usually covers:

• Damage from the weight of snow, ice, or sleet
• Water damage from accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or sprinkler system
• Building collapse
• Damage from falling objects
• Rupture or bursting of heating or cooling systems
• Damage from civil commotions (like riots)

It's crucial to note that even though broad form policies cover more perils than basic form policies, they don't cover everything. There are still exclusions, and often-times any peril not explicitly named in the policy or specifically added as a rider or endorsement is not covered.

Special Form Policies

The most comprehensive of the standard policy types:

All-risk coverage: This typically covers all perils, excluding specific named exclusions like floods or earthquakes. The burden is on the insurer to prove an exclusion applies in claims.

Business Income or Interruption Coverage

In case a covered event interrupts your business operations:

Lost income and operating expenses: This covers lost income and operating expenses when you can't conduct business due to a covered event.

Extra Expense Coverage

For costs above and beyond typical operating expenses after a covered event:

Temporary relocation and expedited shipping: Coverage for costs like moving to a temporary location or overnight shipping of replacement equipment.

Ordinance or Law Coverage

When local laws impact repair or rebuilding costs:

Upgrades required by law: For instance, if a damaged older building must be rebuilt to current codes, this coverage helps with the added costs.

Flood and Earthquake Coverage

Typically excluded from standard policies, these can be critical in certain regions:

Natural disaster protection: Protects against damages caused by floods, earthquakes, and related perils.

Renewing & Reviewing Your Commercial Property Insurance

Your business changes year on year, month on month - especially when you're just starting out. The coverage you had a year ago might not be appropriate this year.

That means insurance is not a "set and forget" thing. You need to be reviewing it periodically.

The good news is that your broker can help you out here (if you have a good one). They should be prompting you to periodically review your coverage, your provider, premium etc. to make sure you are:

• Properly covered against all the risks your business faces, and
• Paying the best price.

The Importance of Regular Review

1. Changing Business Environment: As your business grows, shrinks, or transforms, its exposure to risks changes. Maybe you've expanded your physical location, invested in new equipment, or shifted to a different type of operation. All these can affect your insurance needs.

2. Asset Depreciation or Appreciation: Over time, the value of your insured assets, like buildings or equipment, can change. This could mean you're either over-insured (paying too much) or under-insured (at risk of significant out-of-pocket expenses if a claim arises).

3. Updated Coverage Options: Insurance isn't a static industry. New coverage options, riders, or endorsements may be available that better suit your needs or offer better value.

The Renewal Process

1. ‍Assessment: Begin by assessing your current policy. Understand what's covered, what's not, and the limits and deductibles for each coverage type. Get your broker to do this and give you a report.
2. ‍Compare with Business Changes: Align your current business situation with the coverage. Have there been any significant changes in your business operations, assets, or locations?
3. ‍Gather Quotes: Before automatically renewing with your current insurer, gather quotes from multiple insurers. This can help you gauge if you're getting the best value. Again, your broker should be doing this work for you.
4. ‍Finalize Renewal: Once you've made an informed decision, finalize your renewal. Ensure all new terms, conditions, and coverage limits are clearly laid out.

Periodic Checks

While an annual review is standard, it's beneficial to check your policy after significant business events: major purchases, expansions, or changes in operations. This ensures that you remain covered appropriately throughout the year.

The information provided on this page is intended for informational and general understanding purposes only and should not be considered as financial advice. Before making any decisions related to your commercial property or any other insurance needs, please consult with a qualified insurance or financial professional to discuss your individual circumstances and options.