Commercial Property insurance

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Own or rent a commercial property space? Own assets such as equipment, inventory or computers? You want to protect both the building and the contents inside with a commercial property insurance policy.

An interior of a warehouse.

What is Commercial Property Insurance?

Commercial property insurance provides your business with financial coverage in the case of physical damage or loss to your property and its physical contents (such as the equipment and inventory contained inside).

Physical damage and loss can be caused due to external disasters such as a fire, flood or tornado, and even theft.

A commercial property insurance policy will even cover property that you rent or lease. A long list of assets and property can be covered in your policy.

Warehouse Background

What are some of the benefits of commercial property insurance coverage?

Commercial property insurance coverage provides loads of benefits in the event of property loss or damage. The financial coverage can go above and beyond simply repairing or replacing the damaged property.

Let’s walk through an example to see how a business is covered with a commercial property insurance policy. Let’s say lightning strikes a building and causes a small fire that damages a section of the building and destroys several items, including a machine crucial to the company’s manufacturing process.

How will this business be covered from the financial loss caused by the fire?

Repair costs: The commercial property insurance policy will cover the cost to repair the building and machines so that you can get your business back up and running as quickly as possible.

Replacement costs: To the extent that the damage to the machines is beyond repair, the policy can step in to offer the cost to replace the machines, again ensuring that you can be back up and manufacturing as soon as possible.

Business interruption coverage (loss of income): The loss caused by the disaster or event may prevent you from operating your business on a day-to-day basis. If the damaged machinery prevents you from manufacturing your products, you will experience downtime, lose income and incur expenses such as payroll and bills. The policy may cover you for the loss of income.

You can now see why it’s so important for your business to have a commercial property insurance policy. Unexpected losses and significant property damage can happen at any time and are sometimes caused by freak accidents beyond anyone’s control.

Having adequate coverage for your business will protect you from these unforeseeable situations.

Does my business need a commercial property insurance policy?

Any business that owns or rents commercial property (whether that is an office, a strip mall retail store, or a warehouse) will need commercial property insurance.

If you lease a building or office, your landlord will require you to obtain coverage. This will be standard as part of the lease.

If your business owns assets, such as equipment, machinery, inventory, furniture, fixtures, computers or other electronics, it is wise to obtain a policy, no matter the value.

What is property damage liability?

Property damage liability is more common than bodily injury liability, and the risk of financial losses can be even higher.

A common example for property damage is when a contractor is hired to perform a renovation in the house. They are in the process of bringing equipment into the house and scratch the brand new hardwood floors. A commercial general liability insurance policy will cover the cost to repair or replace the floors.

Depending on the type of product or service your business sells, the risk of property damage can be high. You want to ensure that you have adequate protection against the risk of financial damages.

What is the cost of a commercial property insurance policy?

There is no standard cost for this type of policy given that there are so many factors that impact it. A commercial property insurance is also typically bundled with commercial general liability insurance (CGL) and equipment breakdown insurance.

For a small business with revenues of $1 million and equipment of $250,000, a policy may be in the range of $2,500 to $5,000.

Your trusted insurance broker will learn more about your business and property to ensure that you have adequate coverage.

What factors impact commercial property insurance premiums?

Insurance companies will look at the following details when determining the insurance premiums you will pay:

  • Location: The location of your operations will have a large impact on your premiums. If you are located in an area that is prone to natural disasters (such as forest fires or floods), your premiums may be higher.
  • Age of your property: The older the building, generally the higher the probability of incurring a loss. A rule of thumb is that all things being equal, an older building will have higher premiums than a new one.
  • Replacement costs of your property: The replacement cost of your property, and not necessarily the cost you purchased it for will determine your premiums (e.g. if you purchased a machine 25 years ago for $10,000 that is no longer available and cannot be repaired and a new model costs $30,000, the new price will determine the coverage you need).
  • Plumbing and electrical: The type of plumbing and electrical systems present in the building will impact your premiums. Older plumbing and electrical wiring will increase the likelihood of water damage and electrical fires, respectively.

When you contact us to obtain a quote, your insurance broker will ask questions about these factors to obtain as much information as possible and ensure that you have adequate coverage for your business and property.

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Commercial Property Insurance FAQ

Common coverage exclusions include damage caused by normal wear and tear, property loss caused by a faulty design or plan, damage caused by terrorism, loss caused by computer system failures and damage caused by government activities.

The coverage your business requires is highly dependent on the type of business, the building it operates in, and its contents. Our trusted insurance brokers can advise you accordingly after learning more about your company.