Insurance Explained - Commercial Property Insurance
When you own or manage a business, at the forefront of your mind should be protecting your business assets. You have to consider how you will recover losses and reduce business downtime if your property is damaged, flooded, or stolen. You need just the right protection based on your specific business.
Are You Properly Covered?
One of the essentials of operating a business is protecting your assets through commercial property insurance. But, it’s important to understand your policy options and the insurance solutions available to help you choose the best coverage for your needs.
What is commercial property insurance?
Property insurance is a policy that gives the owner or renter of a structure financial reimbursement if there is damage or theft. Commercial property insurance helps to protect buildings that your business owns or rents and your business personal property. These personal properties can include inventory, equipment, and furniture. Property insurance can include homeowners insurance and tenants (renters) insurance. There are also riders which cover additional property-related risks which may not be offered under a general policy.
Based on the nature of the policy and the claim made, the property insurance policy may offer coverage in one of three ways. It can either provide the replacement cost of the item, reimburse the actual cash value, or pay the extended replacement cost.
- Replacement cost: this pays the cost of replacing or repairing the property with like quality.
- Actual cash value: the policy owner is paid the replacement cost of the property less depreciation
- Extended replacement value: this allows the insurer to pay above the coverage limit especially where construction costs have increased.
Watch our full Insurance Explained Video for All the Types of Insurance You Might Need
Understanding Property Insurance
Risks covered by property insurance include damages that can be caused by fire, smoke, wind, lightning, theft, hail, weight of snow and ice, and more. This type of insurance can also include liability coverage. In the event that someone other than the owner or renter of the property is hurt while at the property and they proceed to sue for damages, your insurance coverage can step in and cover the costs.
The risks covered in a policy are often dictated by state law. For example, in the state of New Jersey, according to the Department of Banking and Insurance “All homeowner's insurance policies exclude water damage caused by flood.” Therefore, homeowners are required to purchase separate flood insurance policies to protect their property from flood damages. However, the regulation of insurance is managed by each state. So, you need to know and understand the protections available to you as a business owner and manager according to your state. (An insurance solutions expert will be able to help here.)
Is flood insurance necessary?
Now, you may be saying that your business isn’t a flood zone, so that’s not something to worry about. And flood insurance is not covered in your property insurance policy so why consider the added expense? But, there are a variety of ways that your property can be flooded and for which you will need flood insurance apart from rising waters entering your building. Water damage can be caused by storms, standing water, drain backups, sewer backups, and other sources.
Flood damage is often quite extensive and expensive to recover from. Imagine a sewer backs up into your office building and you lose your computer equipment. This is a form of flooding, and therefore replacement of your equipment will not be covered under your standard insurance plan. So, even in this simple instance, flood insurance becomes a necessity for your business, even though you aren’t located in an officially recognized flood zone.
These are some of the little things you have to consider when planning your insurance coverage needs. It’s never as simple as it looks, and a small slip can end up costing you more than what you would have paid in premiums.
Evaluating your business/commercial property insurance needs
Your commercial property insurance needs should cover where you work, and depending on the type of business you operate, where you or your property may go in the course of your business. Whether you’re a small business owner or a large commercial complex, you need the best solutions and to understand your insurance coverage options.
Do you rent or own?
As business owners, there are a lot of assets you have to protect. These can include the physical space at which you work – whether you own it or rent. One thing to note, your Landlord’s property insurance will not cover your business personal property. So, if you rent, you have the option for Renters (Tenants) Insurance to protect your business assets. These can include all your equipment such as computers, desks, chairs, etc.
Do you work away from your property?
As a contractor, your needs may be different. You will have to insure the space where you maintain an office and store your equipment whether that is a home office or a separate space. If you travel to complete your business – for example, you’re a landscaper – you have to take your equipment with you. This means you must protect your equipment away from your building. For this, inland marine or floater insurance policy will come into play. Inland marine or floater policies cover equipment that has to be moved to be used as part of your business and which need to be covered away from your property.
How do you handle theft of company property?
Crime and theft coverage help to cover your property if it’s stolen by either employees or someone external to the company. Imagine one of your office’s expensive laptops stolen off a desk? How can you quickly replace it if you have other expenses and overheads to worry about? This is where your business crime coverage can help you to replace company property stolen by an outsider or an employee.
What risks and damages are covered?
If an accident occurs at your business, will your insurance policy cover that risk? For example, if you own or operate a warehouse, and your inventory worth thousands of dollars gets damaged, are you covered? Do you have business personal property insurance that can help you replace the damaged business items? What if a freak snowstorm causes your roof to collapse? Are you properly insure to replace your personal property damaged due to the storm?
Your risks are going to be determined by the type of business you operate. A data center will have different needs from a warehouse versus a school. Some general coverage will overlap. But, you will also need to insure for certain risks specific to your business operations.
Identifying the right property insurance solutions
As you can see, there are a variety of property insurance options available. What you choose should be directly aligned with your type of business. Before you head online and start searching for New Jersey insurance companies, it’s best to start by identifying the solutions that would work best for you and talking with an Insurance Solutions Professional.
Insurance solutions should be tailored to your specific company or business needs and aligned with how your business operates. It doesn’t make sense to pay for coverage you don’t need or fail to take on necessary coverage for areas that directly affect your business. In the long run, this could mean that you are left with out-of-pocket settlements that could lead to loss of your business and even bankruptcy.
So, before you buy, consult with a professional an identify the insurance solutions that are best for your business. Then you can search for the best value for coverage that you need.
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