Business Property Insurance Risk

Running a company without the protection of business property insurance puts you at risk of suffering from severe financial losses when things go wrong. Your company depends on its business buildings in order to conduct normal operations, provide services and make sales. If lightning strikes and starts a fire, or an ice storm causes trees to fall and those heavy limbs cause your building to collapse partially, there will be many issues for you to deal with at once. You’ll have the expensive and time consuming task of getting repairs done, plus you will likely lose income because many of your standard assets are not available for use or sale.

Types of Commercial Property Policies

insurance for commrcial property and assets

Commercial property insurance comes in several different forms, because each defines your level of protection against a given risk. Risk is another word for defining specific types of damage that your company will or will not be protected against. Common risks found to be covered in certain types of business insurance include damages to your company’s buildings from snow, damages caused by wild fires and damages caused by lighting or strong wind.

Since each policy includes protection for specific things and excludes protection for specific things, it is very important that you read and understand your insurance policy completely. Ask questions as needed so that you can be sure your business is fully protected against each type of risk that you deem to be applicable.

Here are some general guidelines:

  • Basic business insurance generally just protects you from common risks.
  • Broad policies provide common risk protection plus broader risks such as the collapse of your building due to ice or snow, and damage caused by leaking water sprinklers or pipes.
  • Special form business policies will cover any risks that are not specifically excluded. A policy might exclude protection for damages caused by war or terrorism for example, or mudslides, floods and insects.

Building Coverage

Business property insurance helps protect your firm when damages or harm come to the physical buildings you own. If you have a broad policy for example, and your workshop roof partially collapses during an ice storm, your policy pays to have that roof repaired or replaced. This protection normally applies to just those buildings listed on your property insurance policy, but it can also automatically extend to protect permanent additions or improvements.

Business Personal Property Coverage

When your company buildings receive damages, there is a strong likelihood that the assets you house inside the structures will also be damaged. Business personal property is a section of your insurance policy that provides protection against the loss of the contents inside your buildings. Building contents might include the furniture in your offices, your computers and printers, finished inventory and paper files.

Lessor's Risk

Lessor’s risk is a term used for insurance coverage on business property that you rent or lease to others, or property that you use 75 percent of and lease the remaining 25 percent to others.  This insurance can be added to your property coverage policy to help protect your company from losses when those structures suffer damages. It is sometimes referred to as Landlord’s insurance.

Replacement cost and actual cash value coverage

Depending upon how your business property insurance is structured, it may provide financial protection in the form of full costs for replacing a structure, the cash value of the building, or some combination of those two.

  • Replacement cost coverage pays benefits based on the current costs for construction. Costs for construction may not be the same as market value and it does not include any land values.
  • Actual cash value coverage pays benefits based on the depreciated value of your property.  Depreciated values mean that normal age or wear factors are deducted from the value of the building, and in some cases it may not be enough to fully cover the costs for rebuilding.
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