Commercial Property Insurance… Who needs It?
A rather sad story of Commercial Property Insurance (or lack of)
So, you’ve opened your first store, you’ve made sure you have product liability insurance, and you’re ready to open your doors to your first customers & you stroll to the front of the store.
Suddenly, you trip and start to fall.
You reach out to try to grab onto something to prevent your downward momentum. In doing so you drag an entire endcap display of electronic video games crashing down with you.
The endcap is completely destroyed as are some of the games, but it’s ok. You’re not actually injured and you know you have commercial property insurance which will cover the costs of replacing the endcap and most of the games.
You hand the key over to a sales associate to open the doors and begin the process of cleaning up the debris.
Every Business Needs Commercial Property Insurance
Any commercial business needs to have adequate insurance to cover any damage to the building, its contents, and items around the building. There are two very basic forms of coverage, the property that is actually insured and coverage for events which lead up to the loss.
Often policies will just cover basic equipment such as the building itself, inventory, and any furniture or equipment necessary to operate the business. Other policies will include things like money held in a store, records and important documents and that type of thing.
In terms of commercial property insurance which covers events leading up to damage (known as perils) there are two basic forms of policies: the named perils policy and the all-risk policy. The named perils policy will only cover damage caused by specific perils named in the policy.
If damage occurs to the business from something that is not actually named in the policy, the insurance company will not cover the costs to repair that damage.
In an all-risk policy, all perils will be covered unless otherwise specified in the policy. The all-risk policy generally carries higher premiums than the named perils policy, but it is also the most widely recommended policy for most businesses.
The business owner will need to decide if the commercial property insurance will pay the replacement cost basis or an actual cash value. With an actual cash value policy, the insurance company will pay the costs to replace or repair the damage minus the depreciation to the property.
This type of policy generally comes with lower premiums because it doesn’t pay out as much as the replacement cost basis policy.
There are a number of factors which will be taken into account when determining the premiums set for the commercial property insurance policy.
The type of building, safety measures which are already in place versus those which are missing, the location of other high-risk areas, and any outlying buildings or structures which will be included in the policy.
Even though it might seem like a waste at the outset, business owners who have had to deal with natural disasters like hail, tornadoes, and other weather damages or who have had their building catch on fire know that commercial property insurance is almost as important as having actual customers.