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Commercial Property Insurance
Commercial property insurance refers to insurance to protect and cover the losses associated with damage to a property or business. Such coverage typically involves losses of inventory or assets including the building or structure in which the business operates. Commercial property insurance can cover both physical structures and property as well as loss of business and income as a result of a disaster.
Types of Policies
Insurance for commercial property varies greatly based upon the type of property or business insured and the type of insurance desired. Since most businesses are interested in keeping the cost of commercial property insurance at a minimum, they may desire to tailor the policy to provide coverage protection for a small number of disasters. Others, however may want to purchase a general policy that covers a large number of disasters. There are two types of commercial property insurance policies:
- Named-Peril policies cover losses resulting only from a limited number of disasters or perils named under the policy
- All-Risk policies cover losses resulting from any disasters or perils except ones that are specifically named. This policy offers a broader range of coverage for the property (as opposed to item-by-item coverage that may require specific policies depending on the classification of each item or property)
Commercial Property Insurance Coverage
Insurance for commercial properties usually falls under one of three forms of coverage:
- Basic Form – Covers common disasters such as fire, lightning, windstorm, vehicles, aircraft, civil commotion or riot.
- Broad Form – Covers the same as the Basic Form but also covers loss or damage from water damage, collapse, glass breakage, weight of snow, ice, or sleet and sprinkler leakage.
- Special Form – Covers damage or loss from any occurrence except any that are specifically excluded from the policy such as flood, earthquake/earth movement, war, wear and tear and insects and vermin.
Insurance for commercial properties also varies on how the policy pays the insurer. Some policies pay out according to replacement cost reimbursement. This means that the policy will pay the policyholder for the cost of replacing the lost property. Other policies pay the owner the “actual cash value reimbursement” based on the replacement value of the property minus the physical depreciation. Cash value options are often less costly than replacement cost options but also pay out less.
Commercial property insurance can also be obtained for specific perils or circumstances that may otherwise be excluded from the base policy. Specialized coverage includes:
- Coverage in the event that the cost of destroying and rebuilding the structure is greater than its value
- Full glass coverage
- Full sign coverage
- Coverage in the event of equipment breakage as a result of mechanical malfunctions, power surges, or boiler explosions
- Protection of accounts receivable records if the records are damaged or destroyed as a result of specified disasters or perils
- Coverage to computer hardware and software
- Flood damage from natural sources such as tidal surges or river overflows
- Crime insurance for protection against burglary, embezzlement, employee theft or robbery
- Inland Marine coverage protects items in transit
- Automobile coverage protects business vehicles both in transit and as property
- Cargo coverage protects inventory in vehicles
Most commercial property insurance policies that provide property protection are combined with liability protection policies for the business or property.
Insurance for commercial policies can cost less if there are security systems in place. Fire sprinklers or alarm systems can keep insurance costs lower. Also, off-site data storage devices can also decrease the premiums for commercial property insurance.
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