How Much Commercial Property Insurance Do I Need?

Any business with a physical address needs commercial property insurance. Commercial property insurance provides compensation for your business’ physical assets in case of fire, hail, wind, smoke, theft, vandalism and more. It can also cover equipment and inventory within the business buildings.

Deciding how much coverage you need depends on the value of the building and the assets that you wish to insure. Similar to a home, you’ll want to calculate the replacement cost value of the business. When purchasing equipment, features and more for your business, be sure to keep receipts to help calculate replacement cost value. Make sure you maintain records of inventory, expenses, etc. You can also have a contractor estimate the replacement cost value of the business building itself.

In general, it’s recommended that you purchase commercial property insurance to cover 100% of your property. Insuring for less leaves you at risk to not being compensated fully for damages that occur.

Replacement Cost Value vs Actual Cash Value

There are two ways that you can receive compensation from a commercial property insurance claim: replacement cost value and actual cash value. Actual cash value accounts for depreciation, meaning that you will get less compensation as the cash value of the insured items decrease. This type of policy is typically cheaper than replacement cost value, but many businesses choose replacement cost value instead. Replacement cost value will replace the destroyed or lost items with those of similar or equal value.

Depending on the type of policy and other factors, businesses may pay anywhere from $500 to $1,000 a year for commercial property insurance. You may also save on this insurance by bundling it into a business owners policy. A business owners policy, or BOP, combines property insurance and liability insurance into a comprehensive, more affordable package.

What Does Commercial Property Cover?

Commercial property insurance covers:

Structures
Indoor and outdoor fixtures
Machinery
Equipment
Appliances
Building contents
Other people’s property the business is liable for (ex: a repair shop)

This insurance does not cover everything, however. It will not replace land, trees, physical money, vehicles, outdoor fences or unattached signs. It will also not cover damage done by floods or earthquakes, though you may purchase separate policies for both if your business operates in a high-risk area for either of these.

Be sure to speak with an insurance agent about your property coverage needs.

No Comments