What is Business Property Insurance?

What is Business Property Insurance?

Anything can go wrong with your commercial property. A natural disaster, a broken pipeline, or a fire can destroy the building. Or, heavy rainfall can wipe out your inventory and your crucial business records, leading to hefty financial losses for your business. Protecting the commercial property, i.e. where your business or office is located is important to ensure the smooth running of your business.

Whether you have a rented property or your own commercial building, securing it with a business or commercial property insurance is a must. In this post, we will discuss all you should know about business property insurance, who should get it, when it’s important, and the coverage it offers. Let’s get started.

 

Understanding Business Property Insurance

Commercial business insurance doesn’t just cover the building where your office is. It includes the heavy equipment and expensive machinery that you use to conduct your regular business operations. Depending on the coverage, it may also cover your inventory. For businesses that spend hundreds of thousands of dollars on inventory and property, business property insurance is important. It can save you from the financial pressure, you’d otherwise face if something were to happen to your building or equipment.

Also read: Property Insurance: Safeguard Your Assets

To know the level of coverage you need, calculate the worth of your property, equipment, and inventory. Calculate the cost of replacement and repair to determine the best policy. The policy can be sold separately or bundled with general liability, worker’s compensation, and other basic insurance policies. Simply put, business property insurance will protect you from the expenses incurred due to property damage caused by natural disasters, theft, fire, and other issues.

 

How Much Does the Business Property Insurance Cost?

As mentioned before, the cost of business property insurance varies depending on the coverage you need, your business type, its worth, and other factors. On average, the insurance costs $67 a month and $800 a year. Note that the insurance isn’t limited to property owners, but is for everyone with a property, including those who rent the building or the equipment.

Also read: What is a Business Owner’s policy?

Again, the cost varies greatly and depends mainly on your business’ value. For instance, someone with a home office would pay far less in business insurance premiums than those who own a commercial property. Of course, the level of coverage will mostly be the same and both types of businesses will be protected against all covered factors. Let’s check out a few common factors that might affect the cost of business property insurance.

Location: Businesses located in areas prone to weather damage or natural disasters will likely pay more for the insurance, as there’s a greater risk of property damage due to unpredictable weather and environmental factors.

Building Construction: The insurance provider will inspect the condition of the business, the plumbing units, the electrical system, the roofing, and other aspects to determine the safety measures you have taken to protect it from damage.

Industry: An accounting firm or a digital marketing office won’t incur the expenses that a manufacturing unit does. Businesses equipped with expensive machinery will likely pay more in insurance premiums than those with little or no equipment.

Security System: Do you have a fire alarm and adequate protection to protect your business in case of a fire accident? If yes, your insurance policy will cost you less.

 

What Does the Business Property Insurance Cover?

A business insurance policy helps cover the cost of repair and replacement for the property and equipment damaged by the cause covered by your policy. The policy is divided into named perils and open perils policies, both of which offer different levels of coverage.

The named perils cover the cost of damages listed in the policy, while the open perils offer a broader range of coverage and include all possible causes of damage except those excluded from the plan. A few common problems covered by the policy include:

  • Theft and vandalism
  • Fire
  • Lightning
  • Wind

The insurance covers nearly all types of assets, including but not limited to, the building, computer, business records, machinery, equipment, fixed assets, outdoor fixtures, supplies, and inventory. In most cases, businesses do not need commercial property insurance if they have rented the property.

Landlords have insurance that will cover all sorts of damages that occur to the rented property, but if you work with heavy machinery and expensive assets, it’s best to get business property insurance. Besides, you can’t completely rely on business property insurance. Your agreement can have a clause that says the things you are responsible for if anything goes wrong with your property. For instance, a malfunctioning HVAC system or any damage to the property after you have installed a new product or made a significant modification to the building can put a financial burden on you.

 

What is Not Covered?

Some instances are not covered by your business property insurance, and it’s important to buy other insurance policies to cover the cost of the excluded items.  Here’s when the business property insurance doesn’t cover you.

  • You or one of your employees caused a car accident while driving your business’s vehicle for commercial purposes. This will be covered by commercial auto insurance.
  • Heavy rainfall led to a flood, which covered the entire office space with water and damaged your heavy equipment and business records. Any damage to your commercial property caused by flood will be covered by the flood insurance policy.
  • You caused damage to your client’s property accidentally while visiting their property. You must have general liability insurance to cover that kind of damage.

The best way to get business property insurance is by bundling it with other types of insurance policies that cover nearly all kinds of damages to the property, as well as, your employees. For instance, a general liability insurance policy can help you cover damage to someone else’s property while having a flood insurance policy means damage to your building or assets due to flood will be covered. Check the coverage thoroughly and bundle the policy with other plans to get broader coverage.