Commercial Property Insurance is far more involved than just having a building limit and some business personal property coverage.
One of the biggest hurdles that insurance agents have is educating you regarding insurance to value on commercial building insurance. Almost all commercial property policies have some form of coinsurance. Coinsurance is a clause in the policy that states you are agreeing that the limit on the building is equal to or greater than an amount specified by the clause. If at the time of the loss the commercial building is not insured to an adequate limit the insurance company will pay an amount less than the full cost of the loss.
You purchase an old masonry commercial building for $250,000, the building has a square footage of 8000 square feet and the company estimates the replacement cost on the building to be $1 million. If the policy has a standard 80% coinsurance clause on a replacement cost policy the insurance company will require that the building be insured for no less than $800,000. If you had only insured the building for $400,000 and then had a fire loss with a cost to repair the damages of $200,000 the insurance company would only pay $100,000 because the building was only insured at half of the required $800,000 and so the loss payment is also reduce by half. Many business owners policies today have an 80% insurance to value requirement built right into the regular policy language so it does not even appear on the declaration page. This is just one example of the intricacies involved in commercial property insurance. Normally you will also find coinsurance clauses that pertain to business personal property as well.
In addition to the physical loss potential to buildings and contents a typical commercial property insurance policy will also cover business income and extra expense associated with the loss. Loss of income can also be extended to cover off premise utility failures that will cover law situations where you have to close your business because of the lack of utility service to the building.
There is also a multitude of optional endorsements such as: equipment breakdown coverage, selling price settlement, blanket limits, earthquake insurance, flood insurance, extended business income coverage, agreed amount coverage, ordinance and law coverage, sign coverage, money and securities, employee theft, just to name a few.
We are here to help you understand your business property insurance needs so that you may make an informed decision as to what coverage you would like to have protecting your assets and satisfying any insurance requirements associated with loans.
We’re looking forward to working with you!