What You Need to Know About Commercial Property Insurance

As a business owner who owns or rents commercial property, you want to mitigate as much risk to your company as possible. This means purchasing insurance to cover damage caused by unforeseen events such as fires, theft, vandalism, and personal injuries.

Commercial property insurance is the perfect solution to achieve this goal. With important coverages that traditional residential policies don’t cover, you can have peace of mind knowing that your equipment, inventory, and other building are financially secure in case of unexpected circumstances.

Do You Need Commercial Property Insurance for Your Business?

Most business owners need commercial property insurance regardless of whether they own or rent the building based on their operations. Plus, many real estate management companies require their tenants to carry such a policy, as do lenders.

If you don’t own the location where you do business, understand that even if your landlord doesn’t require a commercial policy, it’s still best to have one. While it’s true most management services insure their buildings, their responsibility stops at your business property. This leaves shouldering all the costs of any loss you suffer on your own.

What Does Commercial Property Insurance Cover?

When it comes to coverage, these insurance policies focus on the risks associated with commercial property. This could include repair and replacement costs, goods kept in your building, and signage. It can also protect those items belonging to others on your property—for instance, an employee’s personal set of headphones that were damaged in a fire incident.

Below is a quick overview of the protections that commercial property insurance provides:

  • Damages caused by accidental incidents like a fire
  • Theft though not by employees
  • Natural disasters involve occurrences of fires or storms, for example.
  • Coverage against data hacks and breaches

As compressed as this list appears, accident damage is a broad category with countless scenarios. Remember, commercial coverage for your property focuses on potential losses your business faces under certain conditions. Plus, many providers offer additional policy options to purchase to customize your coverage to meet your needs.

Riders are a form of supplemental coverage option that allows businesses to customize their commercial insurance policies further. While these will increase the cost of your premiums, they may prove worth it compared to the loss you might suffer without them:

Important Considerations When Buying Commercial Property Insurance

If you’ve begun the process of researching premiums for an insurance policy, consider the following factors that can impact your rate:

Property Age and Construction

When your insurer sends a quoted rate to cover your commercial property, it’s all about risk. Building materials are important because some are more vulnerable to fire and damage. This is especially true in unmodernized older buildings that may still be using outdated electrical systems or have antiquated sprinkler systems.

Your Location

Another significant rate factor is your property’s location. Is it near a firehouse or hydrant? Are you located in a part of the country known for damaging earthquakes? What type of crime rate does your community have? Depending on the answers to these questions, you may have to pay a higher premium compared to companies located elsewhere in the country. Even neighboring properties can dramatically influence what you’ll pay for coverage.

Size and Use of the Premises

It is well-known that the larger your workspace, the more it will cost to insure. But did you know how you use a worksite also affects property insurance for your small business? Some insurers view certain companies at higher risk than others.

Safety and Security

The safety of your employees is of importance to your insurer. If you run a business that regularly exposes workers to toxic chemicals or requires dangerous activities, your rate may be calculated at a higher price tag. This equation is equally important whether you have decent security measures in place at your facility. This includes easy access to safety features like fire hydrants and sprinkler systems with alarms.

Equipment Age and Type

Costs to replace industrial equipment can be astronomical should a fire or other incident cause damage. The age of these tools also matters for safety concerns and, if posing a noticeable risk, could drive your premiums up. If replacement parts are hard to find, you may want to upgrade to newer tech to keep your insurance costs down.

How Much Commercial Property Insurance Do You Need?

Determining how much coverage you need to adequately cover your commercial property heavily depends on industry regulations (if applicable), what the property management team requires (if renting), and what risks you need to protect against. While this can be an expensive investment, mitigating against possible damage can save your company from devastating financial losses if the unexpected occurs.

Even those who work from home should seriously consider purchasing a commercial policy. This will ensure any equipment, data, or other qualifying losses are covered.

Commercial Property Insurance is Must for Your Small Business

With over $172 million in reported claims in 2020, it’s clear that the risks are real, and you should be prepared for them. When insuring your business property, try to be comprehensive as you build your policy. Work with a reputable insurer that can maximize your protection with a combination of coverage options to meet your company’s unique risks and needs. You may find it’s best to include this coverage in your current business insurance policy. Whichever route you take, don’t underestimate the importance of adequately insuring your company.