Commercial Property Insurance
Commercial property insurance helps protect a business by paying for all or part of costs when a covered loss occurs. In this way, property insurance can help keep businesses open if losses occur, whether you own, rent, or lease the business building.
Businesses can purchase commercial property insurance for basic causes of loss, for instance a fire insurance policy, but the majority of businesses choose a more comprehensive plan, known as a Businessowners Policy or BOP. A BOP provides coverage for damage to the business’ buildings, including installed fixtures, machines, and equipment; and outdoor fixtures. A BOP also covers business contents such as your inventory, machinery, and computers. Items owned by others but that are in your care, custody, and control are also covered to the extent the business is legally liable for that property.
There are, however, some causes of loss that are not covered by commercial property insurance or a BOP, but that can be added by endorsement. Some of these include employee dishonesty, steam boiler breakdown, flood, earthquake, and crime. Take note, also, that not all of your business property is covered with a commercial property policy. For instance, you might need additional coverage for commercial autos, outdoor fences, and signs not attached to your building.
Your independent insurance agent can review your business needs with you to make sure you have the necessary coverage for your unique business needs. And remember to discuss your disaster recovery plans with your agent to ensure you have coverage for lost income and extra expenses that result when recovering from a covered loss.
Coverage choices are RC or Replacement Cost or ACV Actual Cost Value. Whenever possible you want RC. This mean new for old. With ACV the property or contents will be depreciated.
Most insurance policies have a co-insurance amount of 100% 90% or 80%. In simple terms this means you need to insure the
property or contents for at least the co-insurance amount of the replacement cost. If the coverage was $100,000 and you had loss of under $125,000 and had 80% co-insurance you would get $100,000 minus you deductible. You met the 80% co-insurance requirements. If the loss was over $125,000 this mean you were under insured and would be penalized. There is a formula for the penalty.
Co-insurance example: To determine how much to pay on the claim, the insurer divides the amount of insurance you purchased ($80,000) by the amount you should have purchased (80% of $150,000 or $120,000). The result (two-thirds, or $40,000) is the amount of your claim the insurer will pay.
If the building had been insured for at least $120,000, the insurer would have reimbursed you for the full amount of the loss. Coinsurance can be tricky and potentially cost you a ton of money if you under insure your property
Building and contents are based on RC replacement cost not the purchased price of the building or contents. Minimum
replacement cost for a building should begin at $125 a square foot. This depends on the building cost in your area.