What’s Commercial Property Insurance?

A severe storm damages your property. Someone vandalizes your business, breaking your storefront window. Your restaurant’s kitchen catches fire. Natural disasters, vandalism and accidents can harm your commercial property.  

You can’t predict the future, but you can protect your assets. Commercial property insurance covers damages when the worst occurs. You can replace or repair your building, equipment and inventory with business property insurance.

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Who Needs Commercial Property Insurance?

Owning a business means taking on risks. Business insurance helps you prepare for the unthinkable—an employee injury, defective products and property damage. 

You can purchase commercial property insurance alone, though it is often available as part of a business owner’s policy (BOP). These policy bundles include property, business interruption and liability coverage. 

What Assets Can You Protect? 

Property insurance typically covers assets beyond the building, be it an office, storefront or warehouse. Covered assets may include:

  • Building and related structures
  • Computers 
  • Equipment and tools
  • Furniture 
  • Inventory
  • Records and documents 

But…I Don’t Own the Building  

Don’t own your building? You may be wondering if you need commercial property insurance. In truth, all businesses need coverage. You should have a property policy whether you own or lease a commercial building. 

Most commercial lease agreements include liability insurance. Lessees and landlords should also talk about property insurance and include terms for it in the lease. It must be clear who is legally liable for certain damages. 

As the building owner, landlords may already carry property insurance. A landlord may agree to carry insurance on the building if the tenant carries insurance on the business’s personal property. Tenants could also be required to pay a portion of the building insurance in their rent

Commercial Property Insurance Coverage

As mentioned above, commercial property insurance protects your assets from hazards. But what damages do policies usually cover? 

Some policies only cover “named perils,” or the perils the policy lists out by name. The policy won’t cover damage from hazards not stipulated. 

Businesses can opt for broader protection with “open peril” or “all-risk” policies. “Open peril” policies cover everything except the perils mentioned as exclusions. 

Most commercial building insurance covers damage caused by natural disasters, storms, fires and vandalism. Every policy is different. The policies you shop may have unique triggers and stipulations regarding when you can file a claim. They also vary based on your location and the risks associated with your area.

Included below are common causes of loss organized from basic coverage to special coverage: 

This information comes from NerdWallet.

Type of Coverage Commonly Covered Perils 
Basic Coverage
  • Fire
  • Lightning
  • Explosions 
  • Wind
  • Hail 
  • Sinkhole collapse 
  • Volcanic eruptions 
  • Riots
  • Vandalism 
  • Broken glass
Broad Coverage  Perils under basic coverage, plus: 

  • Building collapse
  • Weight of snow, ice or sleet
  • Falling objects
  • Leaky appliances 
Special Coverage  All perils, except those listed in the policy. Example exclusions are: 

  • Insect and vermin
  • Wear 
  • Flooding 
  • Earthquakes 

What Policies Don’t Usually Cover

What’s not covered by most commercial property insurance policies? Flood, earthquake and vehicle damage are not often covered. If you live in an area prone to flooding or earthquakes, you should consider buying those policies separately. Additionally, burglary and cybercrimes are not usually covered.

The Need for Coverage: Protection from the Unforeseen  

National Centers for Environmental Information (NCEI) data shows that natural disasters are increasing over time. 

Between 2017 and 2021, the U.S. had a yearly average of 17.8 weather and climate disasters that cost the country more than $1 billion each. In the 1990s, the U.S. experienced an annual average of 5.5 disasters that cost over $1 billion. The U.S had 6.7 of these events per year in the 2000s and 12.8 per year in the 2010s.

Disasters end lives and ruin livelihoods. The Federal Emergency Management Agency (FEMA) reports that 40% of businesses never reopen after a natural disaster. Few business owners consider the environment before opening. 

Vandalism and crime are other risks businesses face. In 2019, an estimated 6,925,677 property damage crimes occurred across the country, according to the FBI. However, a ten-year trend shows property crime offenses in 2019 decreased by 24% compared to 2010. 

Most Businesses Are Underinsured 

Business owners know insurance is important, but 75% of businesses are underinsured by 40% or more, according to research from Marshall & Swift/Boeckh. 

Rising premiums and lack of personalized insurance packages play into why many businesses don’t have the coverage they need. 

As the economy changes, some business owners give up coverage to save on premiums. If the property is damaged, insurance will cover less, and the company must pay more for repairs. This choice puts businesses in a tough spot. 

Should you save money now and not have coverage to pay for a future (expensive) incident? Should you purchase coverage and cut your budget somewhere else? Each business owner makes the choice they feel is best to keep their company afloat. 

Commercial Building Insurance Cost

A property’s value and location play into insurance costs. Agencies consider these factors to determine insurance rates: 

  • Location. Is the property close to emergency services? Fire protection? The property’s proximity to these services can influence insurance costs. The closer you are to emergency services, the less likely your property will take on extensive damage because responders can arrive on the scene quickly.
  • The building itself. Some building materials are more flammable than others. Certain building materials could knock down the price of insurance. Any code violations or property additions also affect costs.
  • Business industry. Certain businesses are higher risks for insurance companies due to the nature of their services. A restaurant or an automotive repair shop, where fires and accidents are more likely to occur, are riskier options when compared to an accounting firm.  
  • Other tenants. The businesses around yours can cause insurance rates to increase. One hazardous tenant puts everyone in the building or shopping center at risk of an accident—and higher insurance costs. 

According to Insureon, the median cost of business property insurance is $63 a month and $755 a year, with a limit of $60,000. Your cost depends on your property and business, as well as the amount of coverage you’d like. 

The commercial real estate market affects insurance rates. Other economic problems, such as inflation or supply chain issues, influence the cost of repairs. In turn, those costs can increase property insurance rates. 

All commercial real estate owners and lessees should opt for property insurance. You’ll be glad you did when disaster strikes. 

Where to Get Commercial Real Estate Insurance

Are you looking for commercial property coverage or searching for commercial real estate? Commercial One Brokers possesses a wealth of knowledge about the Branson, MO market. We help you find properties that suit your business and connect you to other businesses in the area.

Talk to our team, and start your property search in Branson today. 

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