Commercial Property Insurance
Damage to your work building or store and the contents of what is inside can have drastic effects on your business. Most companies assuage these fears by purchasing commercial property insurance.
Commercial property insurance covers the building you work in and the contents of what is inside your work building. All sorts of businesses, both big and small, take out commercial property insurance policies.
Damage to your office building, warehouse, or storefront without insurance can put people out of work. Without property insurance, business owners become liable, even if it wasn’t them or their employees that caused the property damage.
That is why property insurance is one of the popular insurance policies businesses take out.
After all, maintaining a functioning and safe work environment is essential to running a successful and economical company.
What Can it Cover?
Commercial property insurance, at a minimum, gives payments to repair your building and the property inside if damaged. However, most policies also cover theft and will replace stolen goods.
Like most other forms of commercial insurance, property insurance is fully customizable and is catered to your business’s needs.
Coverage typically includes the building itself, furniture, goods, electronics, documentation, exterior items or advertisement adjacent to the building, and on-site clients’ or customers’ property.
Generally, damage caused by unforeseen circumstances, like fire and theft, is fully covered. Damage to your exterior building, especially damage that displaces workers or destroys an ample supply of your products, is also always fully covered.
What Does it Not Cover?
A commercial property insurance policy cannot protect businesses looking to cover goods or equipment in transit. Consider inland marine insurance if you run a business that transports lots of goods or has employees working out of a van or truck.
Your property insurance policy may not kick in for certain natural disasters depending on where you live. However, damage due to heavy wind, rain, or fire is typically covered.
Your policy will also not kick in at certain times if your employee steals or damages your property.
A commercial property insurance policy does not include identity theft and hacking caused by external sources.
Rented property, property damaged through wear and tear, flood damage, and auto equipment are not covered under a commercial property insurance policy.
Are there Policy Limits?
Most commercial property insurance policies are broken up into two parts:
- The Physical Building, its Fixtures, and Permanent Machinery
- Transportable Equipment, Supplies, and Goods
Policies are flexible with different insurance companies and typically include everything listed above.
However, depending on the incident that occurs and specific details about your building and location, your coverage may be limited. Before you sign any commercial insurance policy, discuss your policy limits with a local insurance agent here at KRA.
Types of Commercial Property Coverage
Contractors Business owners Coverage
Many companies have developed business owner type policies for the contractor, primarily artisan, contractors, plumbers, electricians, inside carpentry, masonry, concrete, etc.
These policies combine some special coverage that cover perils common to the construction business.
This includes any additions, alterations, and repairs in progress. Additionally, all permanently installed fixtures, machinery, and equipment owned by the insured that are part of the building.
Note: South Carolina is an “agreed value” state, so the amount paid for a total loss is shown in the property declarations.
These are things that are permanently attached to the building that cannot be removed without affecting either the value or the aesthetics of the structure, and can include everything from intercoms and public address systems to permanently installed blinds, drapery fittings, or hardware.
Property of Premises in Transit
Except for stock, any covered property temporarily at a location not owned, leased, or operated by the insured is insured up to $5,000. This extension specifically excludes:
- Property in or on a vehicle
- Property in the care, custody, or control of salespersons
- Property located at fairs and exhibitions
- But coverage does extend to property off-premises for repairs, property which the insured lends to others, and tools/equipment at a job site. As with other policies, additional coverage can be purchased in the forms of Equipment & Tools floater, Installation Floater, etc.
Master Pac, Secure Pac, etc
All companies have enhancement forms that, when applied, add additional or increased coverage to their property coverage form. Each company form can be different and must be reviewed to see what additional coverage is provided.
Business Income Insurance (Business Interruption with Extra Expense)
Business income or “time element” coverage was written over a century ago. In the 1940s the name changed to “business interruption,” and this has been replaced by the term “business income” insurance.
The purpose of business income insurance is to do for the insured what the business would have done had no loss occurred. Loss of business earnings, the prime source of money for continuing operating expenses as well as profit (if any), is the subject of this coverage. This coverage applies to the loss of gross earnings minus charges.
Recovery only applies for the time required to repair or replace damaged property with the exercise of “reasonable speed,” so normal operations can be resumed.
Some businesses can’t afford to be out of operation and the extra expense form was written to help get businesses back in operation as soon as possible to reduce the loss of business income. But even after normal operations are resumed, there is a period of time until the business is operating at the level it did before the loss. This feature is built into the current form to extend the period of indemnity for 30 days – with an option to increase the number of days.
Today, many forms cover “actual loss of business income.”
Some businesses by their very nature will make every effort to continue operation using other facilities, etc – no matter how serious the damage to their own property and regardless of the cost.
Examples are newspapers, banks, and broadcasting stations. For such risks, the principal need is extra expense insurance.
Machinery and equipment
This includes drive-on scales, refrigerated lockers, pulleys, etc. An item doesn’t need to be a part of the building structure for it to be considered “permanently installed.” “Permanently” means stable, and “install” commonly means to set up for use or service.
For example, a refrigerated locker is permanently installed if it is set up for use in the insured’s building with the intent that it should remain there “without change” as long as the insured is in business at that location.
Business Personal Property
This is furniture and fixtures, machinery and equipment, stock, and any other personal property owned by and used in the insured’s business.
It is covered when the property is located in or on the insured building, in the open as well as in vehicles on the insured premises, and within 100 feet of the premises.
Note: In South Carolina, after a loss, you must establish the value of the personal property. It can be valued at actual cash value or replacement cost, and the loss will be paid accordingly – up to the limit shown on the declaration page.
This is defined in the form as merchandise held in storage or for sale, raw materials, and in-process or finished goods, including supplies used in packing or shipping goods.
The Commercial Property (CP) 00 10 form doesn’t specify whether goods sold – but not yet delivered – are always treated as the insured’s business personal property rather than the property of others. Whether non-delivered, sold goods belong to the insured or the customer depends on several factors.
The provisions of the bill of sale may state how such property is to be treated, or state variations on the Uniform Commercial Code (UCC) may also clarify the issue.
If the property is considered to be property of others and the insured has not bought this coverage, only $2,500 additional insurance is available under an extension of the business personal property coverage.
If the property is still owned by the insured, it’s covered for the limit that applies to business personal property.
Interest in improvements and betterments in a leased property are protected as a facet of the Business Personal Property coverage of the Building and Personal Property Coverage Form.
The 1990 edition of the coverage form provides coverage for leased personal property for which the insured has a contractual responsibility to insure.
Business Personal Property of Others
This is property of others in the insured’s care, custody, or control. The same conditions apply as to insured’s property. An extension limit of $2,500 is automatically provided by coverage extension, but additional coverage can be purchased.
Off Premises Power Interruption
This coverage can be purchased by endorsement. Almost all business operation is dependent on power. A power surge, spike, or outage can cause damage to equipment, loss of perishable goods, and downtime, which results in loss of revenue.
This endorsement covers this type of peril, and by the addition of CP 15 45, you can add coverage for loss of business income. There is a long list of property endorsements; some provide very important and necessary coverage.