Nebraska SBDC Blog

As a business owner, one of the many important things you need to consider is business insurance. While there are several types of insurance coverage you might benefit from, one to certainly consider, if you own business property, is commercial property insurance.

What is Commercial Property Insurance?

Just like you might have homeowner’s insurance or coverage for personal assets, you can get commercial property insurance to protect any business property you own from things like theft, fire, vandalism, and storms.

What is Covered Under Commercial Property Insurance?

The first thing that comes to mind when you think of business property is probably the real estate you own or lease for your business. That certainly can be covered by a commercial property policy, but coverage can also include:

• Computers
• Equipment
• Office furniture
• Outdoor signage
• Inventory
• Landscaping
• Accounting records

And even if you have a home business, commercial property insurance can be helpful. It can cover things that your homeowner’s policy won’t, as long as it’s for business assets.

What Isn’t Covered By Commercial Property Insurance?

A more important question than what is covered by commercial property coverage is what isn’t. Unlike assets related to your business, personal property is not covered.

If you own a multi-tenant commercial property, losses arising from the tenants isn’t covered by your business insurance.

Important to note: commercial property coverage isn’t liability insurance. If someone gets injured on your property, this type of insurance won’t cover bodily injury, but liability insurance will.

Also, commercial property insurance typically doesn’t cover floods or earthquakes, though some insurers offer limited coverage or optional additional coverage for it.

How Commercial Property Insurance Works

To purchase an insurance policy for your business assets, start by taking inventory.

Coverage should include anything of value that your business owns. Your insurance company may ask you to complete a coverage form listing all your assets and their values. Note that some business property insurance policies may not fully reimburse your costs to replace an asset, so read the fine print to see if that’s the case.

Just like with any other type of policy, such as general liability insurance, you’ll pay your monthly premium, which is based in part on the deductible size you choose. The lower the deductible, the higher the premium.

Should you need to file a claim, you would contact the insurer and file a claim for the covered loss. The insurance company would investigate the claim, and if approved, you would receive a check for the amount of the loss or damage, minus the deductible.

How Much Does Commercial Property Insurance Cost?

The cost for a commercial property insurance policy will vary depending on the value of the assets you’re insuring, the amount of coverage you want, and the insurance company you buy from, as well as other factors.

What you pay for your insurance policy may depend on where you live. If it’s an area where storms or other natural disasters are common, you may pay more than you would in other parts of the country.

If you are insuring a physical property, the materials it was constructed with will also determine your rate. Having fireproof building materials, as well as upgraded wiring and plumbing, may lower your rates. Having a fire alarm, security, and/or sprinkler system installed may also reduce your rate, as well as having a nearby fire hydrant.

Your cost will also depend on what insurance coverage you choose, as well as any optional coverage you add on. Many insurers have add-ons for earthquake or flood insurance, so if these are a concern, make sure to build these extra expenses into the quote you get.

Your cost will also depend on whether you have other policies with the same insurer, as many will offer bundled pricing. You could, for example, save by purchasing a commercial property policy as well as liability and business income insurance together.

Does Your Business Need Commercial Property Insurance?

So we come down to the real question: does your business really need a commercial property insurance policy?

To answer the question for yourself, consider the physical assets your business owns.

The cost of the monthly premium will be less than the potential financial loss you could experience.

For home-based businesses, the answer may vary. If your business assets are nothing more than a computer and office furniture, your homeowner’s policy may cover those. But if you store products at home or have expensive equipment, having separate property coverage for your business property could bring peace of mind.

Choosing the Right Commercial Property Insurance for Your Business

Your business should choose the best commercial property or commercial real estate insurance policy, as well as the best insurance company, for your needs.

Once you know how much coverage you want, start shopping companies. Know that some will assign you your own independent insurance agent, while others (online insurers, who may offer cheaper policies) will just give you an 800 number if you have questions or need to file a claim.

Quotes may vary from one insurer to another, but realize that cheaper doesn’t mean better. Take into consideration the deductible for each policy, as well as the company’s reputation for customer service.

Understanding Commercial Property Risks

One of the main reasons to consider business coverage is because owning commercial property, whether it’s real estate or equipment, comes with risks.

You have the risk of theft, which can destroy your business if you don’t have the funds to replace the lost inventory. Then there are natural disasters like storms and fires, which can cause not only property damage but also wipe out your inventory.

While these risks aren’t preventable, they are mitigated by having commercial property insurance.

Commercial Property Insurance FAQs

As you consider the type of commercial property policy that’s best for you, you likely will have questions like the following:

• What is Proof of Commercial Property Insurance?

There may come a time when you are asked for a Proof of Commercial Property Insurance form, also known as an ACORD 28 form. Typically, banks making loans secured by real estate may require this as assurance that the property is insured. If you are asked for this form, contact your insurance company for proof of the coverage your property policy covers.

• What is the Typical Deductible for Commercial Property Insurance?

Deductibles for commercial property insurance will depend on the commercial property insurance policy and insurer, but will either be a flat rate deductible or a percentage of the value of the property.

Nav’s Verdict: Commercial Property Insurance for Small Business

If you own commercial real estate or property, having commercial insurance coverage can ensure that you don’t have to worry about what would happen should you experience loss or damage to that property. Being insured can help your business thrive, knowing you won’t have to scramble to cover those costs out of pocket.

Printed with permission from ASBDC. For the original article, click here.