Commercial property insurance might seem like another way for insurance companies to take your money. Yet, when damage happens (and it will happen), it can be the lifeline your business needs.
For example, certain natural catastrophes, robbery, fire, and other dangers are covered by commercial property insurance (also referred to as business property insurance). Commercial property insurance does the same for businesses that homeowners’ insurance does for homes.
Your small company might be covered even if you operate from home or if you rent or lease your office space. No worries if you’ve been wondering if getting commercial property insurance is the right move or not. We’ve got your back.
Keep on reading for our full breakdown of the five main reasons you should buy commercial property insurance.
What Is Commercial Property Insurance?
Let’s start with the basics.
Generally speaking, protecting your company’s physical assets in the event of a fire, explosion, broken pipe, storms, theft, or vandalism is covered by commercial property insurance.
However, commercial property insurance typically excludes earthquakes and floods from coverage unless those dangers are included in the policy.
Understanding the Types of Coverage
There are two main types of property insurance currently available on the market. Those are the direct damage coverage and the time element coverages.
Let’s take them one at a time.
Direct Damage
When most people hear the term “property insurance,” they picture something like this. If you lose anything or damage something, you’re covered by direct damage.
Business property insurance policies frequently cover property replacement or reconstruction. After a covered natural catastrophe, you may additionally include cleaning and debris removal coverage in your policy.
With endorsements, you have the freedom to customize your direct damage coverage to meet your specific needs.
Time Element Coverages
Losses incurred by your company due to an occurrence are closely linked to the length of time it takes to restore the damages under time element coverages.
Your losses will rise in direct proportion to the length of time it takes to restore your company. Direct damage coverage is often linked to time element coverage.
Replacement Cost or Actual Cash Value?
To pick the best policy for your business, you’ll have to get a solid understanding of the differences between replacement cost and actual cash value.
This is a factor that can heavily influence your monthly premium.
Actual Cash Value (ACV)
Depreciation is taken out of the total cost of the item(s). Most of the time, you’ll get less money than you paid for anything than you originally paid for it.
With this option, you’ll pay a smaller monthly premium than the other option, which is more expensive overall.
Replacement Cost
If a natural disaster damages or destroys your property, your insurance provider will compensate you for the total replacement cost. Because the monetary amount you get is often more than ACV, this form of coverage is more costly. Consider this coverage option if your company’s assets are expensive to replace.
It may be tough to choose which sort of insurance coverage is best for your company. Replacement Cost is often more costly than your Actual Cash Value. Premiums might vary significantly. Talk to a professional insurance agent about any potential risks you may encounter and go through them with them.
Benefits of Getting Property Insurance
So, you are clued-up on some of the basics of how property insurance works. Now, it is time to dig into the positive aspects of getting commercial property insurance as a tenant or building owner.
1. Getting Insurance for Commercial Buildings
Businesses often lease space to perform their day-to-day activities. Make sure to check your lease to see if you have any insurance responsibilities.
If a single tenant is responsible for insuring the building or paying the rent even if the space is completely damaged, they may be held liable.
Insurance coverage should be reviewed with an insurance agent before signing a lease. This will ensure that you are covered in the case of a loss or damage to the property.
2. Covering Financial Losses
This insurance covers financial losses. And this is the most compelling reason to get commercial insurance for small and medium-sized enterprises with a single location.
Having commercial insurance protects a company’s finances in a variety of ways.
For example, suppose a natural catastrophe like a hurricane or tornado occurs. In that case, a commercial building insurance coverage might spare the company’s owners from having to foot the bill for the repairs themselves.
3. Added Credibility
Uninsured businesses are seen as less trustworthy than insured businesses. It’s as simple as that.
In addition to ensuring that a company’s suppliers and customers know that if the firm cannot meet its contractual obligations, business insurance provides a safety net for them.
Especially in today’s competitive world, this may be a significant advantage. You can learn more here about the most reputable commercial property insurance providers.
4. Protection Against Business Interruptions
For businesses that have to halt operations temporarily, commercial property insurance may help guarantee that lost income isn’t completely wiped out. These policies do not replace the business property coverage outlined above, but they are an excellent addition.
Traditional property insurance plans tend to cover property damage. If you shut down your company for an extended period, owners may want to look into a business interruption insurance policy to help cover the costs.
5. Reduction of Stress and Risk
Even if you don’t have to worry about vandalism, hurricanes, theft, or similar incidents, being a business owner is a stressful, well, business.
However, if the firm has insurance coverage in place, this risk may be quickly and efficiently minimized. Ultimately, no one has access to a crystal ball that can tell them what will happen soon. So why not safeguard your company in the event of a future surprise?
Guide to Commercial Property Insurance: Simplified
Dealing with expected business risks is one thing. But, trying to plan for the unexpected can be somewhat overwhelming. Thankfully, you don’t have to divine what could happen in the future with commercial property insurance on hand.
Hopefully, our guide has shed some light on the benefits of getting the right commercial property insurance for your business. And, if you liked reading our explainer, then you’ll love checking out our additional guides. Those will be available in our business section.
