Commercial Property Insurance Cost Explained
Do you own a business in the U.S.? If so, you will be required to have commercial property insurance – whether you own a physical property, are on lease, or operate your business from home!
They ensure all your company’s assets are protected from natural disasters or theft. As a business owner, time is your greatest asset.
In this blog, we aim to provide you with all the essential information concisely and effectively so you can safeguard your business with commercial property insurance coverage.
What Is Commercial Property Insurance?
Commercial property insurance is a specialized form of insurance coverage designed to protect businesses from financial losses due to damage to their property and physical assets.
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A variety of businesses, including manufacturers, retailers, service-oriented businesses, and not-for-profit organizations carry commercial property insurance.
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It offers the same kind of protection as property insurance for consumers. This is also called business property insurance and is mostly bundled with general liability insurance as part of the business owner's policy.
That’s the overview for you! As we move further, you will understand commercial property insurance costs, problems covered, what’s not covered, and more.
Stay tuned & keep reading!
What Does Commercial Property Insurance Cover?
You now know that commercial property insurance coverage is used to replace or repair your business property if there’s damage due to a covered peril. But still, aren’t you curious to know what’s actually covered under commercial property insurance?
Let’s get to the specifics👇
There are two types of perils typically covered under commercial property insurance policy, they are:
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Named perils policy
This helps cover all the costs of the problems that were listed in the policy. It includes fire, theft, vandalism, severe wind damage, and more.
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Open perils policy
This has a broader protection helping business owners recover from any damages and problems other than those listed in the exclusions. Due to its wider coverage, you will have to pay more than usual.
Now that you have basic awareness regarding the type of policies, it’s time to talk about finances.
In the next section, let’s see how much money you are required to invest in commercial property coverage.
Calculate commercial property insurance cost
According to Insureon, the median commercial property insurance cost is approximately $67 per month or about an average of $800 a year.
FYI - You need not be an existing property owner to buy commercial property insurance for your business. You can get it right from your rented office space or for your office equipment.
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To determine the total cost of commercial property insurance, you need to first take an inventory of all the physical assets of your business, including the building.
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This information will help you understand the total replacement value of your assets and building so that you can find out the level of coverage your business should get.
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Let’s say you are ensuring your office is set up at home, a relatively small setup compared to a big office building.
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The insurance cost for commercial buildings that you pay would be far less than that of a person who is insuring his/her own office building.
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So, you need to understand that the costs differ based on the type and size of your business.
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It doesn’t mean that all small businesses pay less and large-scale businesses pay more. For example, a small business like a construction company will have a larger risk profile.
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In such cases, you will have to pay double than usual due to larger equipment and storage space risks involved.
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To understand how the cost of commercial property insurance is determined, let’s have a deeper look into the factors that affect these costs of your commercial property insurance coverage below.
What drives commercial property insurance costs?
The reality is that no two businesses are the same and hence the cost of commercial property insurance and the premiums differ based on a variety of factors that we will discuss below.
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Location is the key
The place where you have established your business plays an important role in finding out the total costs that you will be paying.
If you’re located in an area where perils are common, your insurance costs will be higher. But, if the buildings are tucked in between other large buildings, the premiums might be comparatively lower.
This is what experts call a micro-location. The place where the building is located within a particular area.
If your business is located in a place with a higher crime rate, you can expect to pay higher commercial property coverage. In case there is a police or fire department close to your business property, you will pay a lesser premium.
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Your line of industry
Companies that operate with complicated machinery and expensive equipment will pay more for property insurance.
The more riskier your operations, the higher premiums you will be required to pay. This is because the probability of potential hazards is higher with the riskier business.
Most importantly the inventory of your business also plays a major role in determining the insurance cost for commercial buildings. Let’s say you have a retail store selling consumer appliances and electronics.
You need more protection in case something happens right? That’s why the type of inventory stocked up in your store matters.
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Total number of customers & employees
People who walk in and out of your business regularly influence the price you pay towards your insurance premiums.
This is usually the case for businesses that operate day and night. They pay more premiums than the business with a typical eight-hour workday.
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Type of construction materials used
The materials used in the construction of the building, its age, and compliance with safety codes are important factors.
A property made with bricks and stone is considered strong enough to withstand damage. So the costs are going to be cheaper. Whereas properties made out of wood are highly flammable and are considered a liability by the insurers.
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Age of your buildings & equipment
It’s not a surprise that older properties are expensive to insure. But, there is a way to reduce your commercial property insurance cost. You can invest in renovation and regular maintenance.
For example, replacing old wiring systems with newer ones can increase the safety measures in your building, ultimately leading to lower costs.
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Safety measures & security standards
Installing fire sprinkler systems, security cameras, alarms, and other building-safe equipment can make your property free from theft, damage, or vandalism.
Make sure to have a bunch of safety standards and share them with your employees so that your costs are not as high as you expected.
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Replacement value or cash value
You get to decide if you want to purchase a replacement or an actual cash-value policy. Here’s the difference – Replacement costs in your policy mean that you will receive the total worth of your damaged property when it was brand new. No reductions involved.
Actual cash value policy will depreciate the property value based on the damages that were caused. So, you will only receive the value that has been depreciated from the actual worth of the property.
Understanding these factors is essential for businesses to budget their investments in insurance payments accordingly.
To further clarify your confusion, we will also let you know all the things that are not covered in the commercial property insurance coverage.
What's not covered?
Knowing what’s not covered will help you figure out if you need any additional coverage. Here are some of the situations when you can’t claim coverage benefits:
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During business deliveries
When you cause a car accident during a business delivery in your company’s vehicle. This is covered by your commercial auto insurance.
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During flood damages
You won’t get coverage if there’s severe flooding in your office building. In such cases, a separate flood insurance policy will come in handy to you.
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During client visits
If you accidentally damage your client’s property when you visit them, the damages are only covered by general liability insurance and not commercial property coverage.
To confirm what’s covered in your coverage, it is best to check with your insurance provider for a detailed description of what’s covered and what’s not.
Finally are you up to grab some tips before we end the blog?
Tips to buy the best commercial property insurance
Securing the right commercial property insurance is important for protecting your business assets. Here are some valuable tips to guide you in making an informed decision:
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Know what your business needs
Understand the specific risks your business faces. Evaluate factors such as location, industry, and the value of your assets to determine the coverage you need.
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Compare different policies
Shop around and compare policies from different insurers. Assess coverage limits, exclusions, and deductibles to find a policy that aligns with your business requirements.
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Consider your industry risks
Recognize the unique risks associated with your industry. Some businesses may require specialized coverage based on the nature of their operations.
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Review your policy exclusions
Pay close attention to policy exclusions. Understand what is not covered by the insurance and consider additional coverage or endorsements if needed.
Implementing these tips can help you get the most out of your commercial property insurance coverage and negotiate the policy terms with your insurance provider.
Do you need Commercial Property Insurance?
To wrap up our discussion, the decision to invest in commercial property insurance depends on several factors listed in this blog. If you are a business owner with valuable assets, a physical location, or employees, the answer is likely yes.
Commercial property insurance provides complete financial protection against a range of risks, including property damage, theft, and liability claims. If your business could benefit from these, then why not go the extra mile and get the insurance coverage?
The peace of mind that comes with knowing your business is safeguarded against unforeseen events is invaluable.
It allows you to focus on the growth and success of your business without the constant worry of potential financial setbacks due to property-related issues.
But, know what coverage suits your business well, before making the move!
We are sure that by carefully assessing your needs, comparing policies, and working with experienced professionals, you can find the right coverage that aligns with your business goals and protects your assets effectively.
Insure your business & focus on its growth
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