Commercial property insurance is needed to protect your business’ assets against loss against many perils including fire, wind, water damage, and theft. Coverage is available for buildings and real estate, contents, equipment, and loss of income. Whether you lease space as a tenant, or own multiple buildings, if you’re in business you need Commercial Property insurance.
- Building coverage provides protection for your buildings or permanent structures.
- Business Personal Property
- Business Personal Property provides coverage for your business’ contents, equipment, furniture, inventory, and other tangible supplies. It can also provide coverage for improvements or betterments if you are a tenant.
- Business Income & Extra Expense
- Business Income coverage helps provide loss of income due to damage or destruction of your building or property. Extra Expense coverage provides for extra expenses you incur while those damaged or destroyed items are being repaired or replaced.
What’s covered depends on the coverage form you purchase. In commercial property insurance, there are 3 forms:
- Basic Form (less expensive, least amount of coverage)
- This coverage form provides coverage for named perils including fire, lighting, explosion, wind/hail (unless excluded), smoke, vandalism, sprinkler leakage, aircraft or vehicle collision, riot or civil commotion, sinkhole (unless excluded), & volcanic activity. With this form, if the peril is not listed, there is no coverage. We encourage our clients never to pick this coverage form.
- Broad Form (more expensive, more coverage)
- This coverage form provides all the named perils covered under the Basic Form plus coverage for the following: weight of ice or snow, water damage, falling objects, & collapse from specified causes. Although broader than the Basic form, our agents try to avoid this form due to it being named perils coverage.
- Special Form (most expensive, best coverage)
- This coverage form is the most comprehensive & it is the form we recommend to all of our commercial clients. It provides coverage for all perils UNLESS specifically excluded. Typical exclusions include coverages that are either available elsewhere or uninsurable, such as Ordinance or Law, Earthquake, Flood, War, Neglect, Intentional Acts, and Nuclear Hazard.
Actual Cash Value (ACV) vs. Replacement Cost (RC)
When it comes to loss valuation there are 2 options that most carriers will allow for: Actual Cash Value and Replacement Cost.
- Replacement Cost
- Pays the insured whatever it would cost to replace the items that were damaged, lost, stolen, or destroyed with property of like kind and quality
- Actual Cash Value
- Pays the insured out an amount equal to the replacement cost minus depreciation. This means payment on your older building or contents could be a fraction of the cost to actually replace them.
Coinsurance can Cause Chaos!
One of the most important clauses on a Commercial Property policy is the coinsurance clause. The purpose of this clause is to provide a financial incentive for the business to carry adequate limits of coverage. Through coinsurance, the business agrees to “coinsure” any loss with the insurance company if it does not purchase adequate limits of insurance. For more information on this often-confusing clause, please check out our blog post: Coinsurance Can Cause Chaos!
Florida is Special!
To say Florida is special when it comes to Commercial Property insurance is an understatement. Due to our location & susceptibility to hurricanes the market for Florida is unique from most every other state. A few things set our state apart from the rest:
- 2 Types of Deductibles
- If you have Commercial Property insurance in Florida, you most likely have 2 deductibles. One for wind or hail, and the other for all other perils. Most insurance carriers require a percentage deductible for wind or hail which allows the deductible to increase as the Building or Business Personal Property coverage increases.
- Non-Admitted markets
- Due to the hurricanes in Florida, many admitted carriers (carriers backed by the state guarantee funds, who are required to file rates) have deemed most of Florida undesirable. For this reason, many non-admitted carriers (such as Lloyds of London) insure commercial property in our state. These carriers provide affordable coverage with unique terms, but they are not backed by the state guarantee funds, and the coverage terms could lead to less coverage overall. Therefore, when dealing with these markets we recommend you consult with your commercial agent.
- Sinkhole may not be covered
- Many Commercial carriers now exclude Sinkhole loss, and only include coverage for Catastrophic Ground Collapse
What Impacts Pricing?
- Amount of coverage – the more, the more expensive
- Age of construction – the newer, the better
- Building updates – the more recent, the better
- Deductible selection – the larger the deductible, the more savings
- Type of construction – the more resistant to fire or wind loss, the better
- Distance to the coast – the closer you get, the higher the premium
- Distance to firefighting equipment – the closer, the better
- Protective safeguards, such as sprinklers & central station burglar alarms – the more, the more credits
- Occupancy – the risky the business, the higher the premium
- Theft in area – the more theft, the higher your premium
Endorsements to Consider
- Ordinance or Law
- Coverage for loss & demolition costs to the undamaged portion of the building & increased costs of construction which are required by state, city, or municipality ordinances or laws.
- Equipment Breakdown
- Coverage for loss due to mechanical breakdown of equipment.
- Business Income from Dependent Properties
- Coverage for loss due to the damage or description of a property that your business depends on for customers.
- Utility Services
- Converge for loss due to lack or loss of incoming electricity.
Questions to Ask Your Agent:
- Will obtaining a wind mitigation report impact my pricing?
- I’m not in a Special Flood Hazard Area. Should I get Flood coverage?
- What savings could I see by raising my deductible?
- Do you recommend getting a construction appraisal for my building?
- What’s the difference between a wind/hail deductible, named storm deductible, and a hurricane deductible?