Commercial Property Insurance: What Is it and Why Is it Important

Written by Isabella Goode Posted On Thursday, 09 April 2020 13:01

Every business has at least some physical assets. Such assets include the building, the equipment, the outdoor fixtures, and more. All this stuff can get damaged, and replacing it can be quite expensive. If you do not want to spend thousands or even tens of thousands of dollars, replacing it in case of disasters like floods or fires, you need commercial property insurance. When you have commercial property insurance, you can get the help you need during disasters and get back on your feet as fast as possible.

How Commercial Property Insurance Works

Commercial property insurance coverage varies based on the company that is providing the insurance policy, as well as the nature of the damage the property has sustained. That said, commercial property insurance usually covers damage from planes or vehicles, theft, vandalism, fire, or explosions. In some cases, some insurance providers also include natural events like floods and storms. Check what’s on offer from an insurance company like The Hartford. You can obtain a quote online in just a few minutes. 

The items usually covered by commercial property insurance are the inventory, the office equipment, the building, and outdoor items like signage.

Before Getting the Insurance

One of the most important things to do before getting the insurance is to take a thorough inventory. This helps you decide what items you would like to insure and those you would not want to. When taking this inventory, it is also an excellent exercise to consider the replacement value of the items you would like to insure and think about whether it would be worth it to protect them. 

Some of the things that are absolutely necessary to insure include:

• Inventory that is in stock
• Your business building. If you rent and the nature of your business requires that you insure it, there are options for that too.
• Accounting and other important company documents
• Landscaping
• Fencing
• Processing and manufacturing equipment
• All office equipment including computers, furniture as well as communication and internet systems

Two Ways to Have Things Covered

There are usually two ways that commercial property insurance providers compensate you for your loss:

• Actual Cash Value - This is the amount it would take to replace the property with a similar and new property minus depreciation.
• Replacement cost - This is the amount of money it would take to rebuild, repair, or replace property on the same premises. When calculating the value, insurance companies will consider the material and quality of the previous property. Companies do not usually subtract depreciation from this valuation. 

It is important to note that if you insure property under the Actual Cash Value option, your premiums will be lower. This is because the possible compensation is lower, as the depreciation is taken into account when doing the calculations for the compensation. On the other hand, the amount of money you receive if you are under the Replacement Cost option might not be enough due to inflation and other factors.

Conclusion

Commercial property insurance is crucial if you would like to protect your property. Just ensure that you read the fine print to know exactly what you will be getting in case you need compensation.

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