If you’re just starting a new business, the variety of insurances that are out there can feel overwhelming. Commercial property insurance is one of the main types of insurance for small businesses that they’ll probably need from the start.
You may know commercial property insurance as commercial building insurance, business property insurance, commercial real estate insurance, or non-residential building insurance. They all protect physical items or structures related to your business, and can help you repair or replace them.
Commercial property insurance is not the same as homeowner’s insurance, because it offers coverage for specifically business-oriented items and spaces.
Homeowner’s policies typically won’t cover technology, equipment or files related to your business. It also won’t cover equipment, items or property that’s stored elsewhere, like a warehouse or storage facility.
So, let’s say you’re running a boutique winery. First you start production in your basement, but soon you put up a large building to house large tanks of wine, a bottling machine and a small tasting room in your yard. Homeowner’s insurance will probably not cover the equipment and inventory still in your basement, nor will it cover the new structure to house your expanded operations, even thought your winery is still on your personal property.
When the worst happens, business property insurance helps you handle the damage and move forward. Commercial property insurance protects physical items you need, like the physical building you work out of, the equipment and tools you use, and your inventory.
Even if you rent a space, business property insurance protects the items inside the building, which can still be damaged or destroyed. You also may need to continue paying rent even if your building is compromised after a fire, and commercial property insurance often includes coverage for business interruptions, lost income, operating expenses and repairs to structures.
Every business needs commercial property insurance, including home-run businesses. Typical homeowners’ property insurance won’t cover damage to business owned equipment or inventory, so if you run a tax accounting business from a spare room, commercial property insurance will help cover damage to your computer, furniture and other business personal property.
If you run your business out of a physical location, own or lease inventory or equipment, and would have to close down if your property was stolen, broken or damaged, then you need commercial property insurance.
If you don’t own the building, check your lease to understand the terms of the insurance and what your obligations are. Sometimes tenants must insure the business property themselves. Sometimes tenants are required to continue paying rent even if the property is destroyed.
So if lightning hits your warehouse and starts a large fire that makes the building unsafe, you might still have to pay rent even when you’re not doing any business. Some commercial property insurance will cover loss of business or disruption of business for that reason. Talk with your insurance agent to find out what the terms, limits and obligations
As always, commercial property insurance has limits. It doesn’t cover everything. Damage to your property done by an employee isn’t covered, for instance, so if your employee drives a forklift into a large shelving unit, that’s not covered. If you or your employee gets into an accident in a company owned car while doing a delivery, that’s not covered either.
Earthquake and flood damage are not covered. Those types of incidents have their own specific insurance policies. If you’re in an area that gets earthquakes, or if you’re near a body of water and not sufficiently removed from it, you should look into earthquake or flood damage.
Ask your insurance agent about your property specifics and what is covered.
Commercial property coverage is right for almost every business who has equipment and/or inventory and a physical location where work happens, even if that’s a home. Often, commercial property insurance can be combined with other general liability coverage as a part of a business owner’s policy (BOP insurance). Combining them makes the package less expensive and more comprehensive.
With a combined business owner’s policy, you’ll get insurance tailored to your business needs that covers your own inventory, structure, equipment and products, as well as damage to other people’s property, injuries to vendors or customers and costs associated with lawsuits resulting from that damage.
Property policies ranges in price. The cost varies by your business’s geography, size, security, building and equipment age, current protections in place, foreseeable hazards and the property value itself. If your coverage specifies that it will pay out actual cash value, that means they will pay for the item’s depreciated value, rather than a replacement value, which pays out for the cost of a brand-new item.
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