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Commercial Property Insurance 101

Commercial Property Insurance 101

Insurance coverage for the things you own goes by a few names: hazard insurance, fire insurance, and most commonly, property insurance. You may have it but do you know what it covers? Is your policy covering everything you need?  Let’s take a look inside your property policy and find out.

The Basics

Most property insurance policies cover the items below, if requested. Limits are selected by the policyholder and may be subject to coinsurance penalties.  Your insurance broker can help you select appropriate limits of coverage.

Your building. The structure on your premises that you own where you reside or conduct business. This may also be a structure that you rent or lease to others.

Other buildings. Unlike on a homeowners policy, business policies require other structures on the premises to be scheduled in order to provide coverage for those structures.

Business Personal Property. Also known as Contents coverage, this includes both furnishings and fixtures, items that your business owns that are not part of the building.

Business Income. If you select this coverage and the damage to your business location causes financial harm to your business income, coverage would be paid out under this provision. There is usually a waiting period of 24-72 hours, but the payments allow you to pay key staff, vendors and utilities while repairs are being made. There may also be an Extra Expense limit under this provision that covers those items you wouldn’t normally need to pay if the business was up and running.

Digging A Little Deeper

These are property coverage items that you may need, but didn’t know you could insure:

Loss of Rental Income. If you rent out your building and all or part of it becomes unusable due to a covered claim, Loss of Rental Income will pay you for the rent you would have been owed by your tenants if the building wasn’t damaged.

Tenant Improvements & Betterments (TIB). If you are a tenant in a building, any custom buildouts such as walls, built in shelving and cabinets that you install specifically for your business should be insured separately. They aren’t the building owner’s responsibility, and they aren’t technically Business Personal Property, so they are insured separately as TIB.

Ordinance or Law. This coverage is a gap coverage for those instances where a property claim means rebuilding or renovating a damaged structure to bring it up to current code. This covers extra expenses such as building demolition or increased cost of construction to include requirements that may have been grandfathered in with the previous structure.

What About Those Sub Limits?

Some property insurance or package policies may include sub limits for things such as trees & shrubs, fine arts, computer equipment, etc. These sub limits of insurance may be helpful in small claim situations, but are more often not helpful because:

  1. The limit of insurance is far less than may be required to pay your claim.
  2. The limit is a sublimit of your property insurance, so it is paid out as a part of your insured limit, not in addition to that limit.

In the event of a total property loss, the limits insured on the declarations page of the policy are the only limits paid out, less the deductible. Sub Limits of insurance do not increase your claim payment.

What Is Not Covered

For every item that a property insurance policy covers, there are many that it does not. Some coverage is not available, while others may be insured under a different type of policy.

Land surrounding a covered building or vacant land. Grass and dirt themselves are not covered under a property insurance policy, since very little damage can be done to them. Vacant land poses no property insurance hazard.

Inland Marine. Moveable property such as tools and equipment, fine arts, antiques, computers, property in transit and items being used to build or install property at another premises should be covered under an inland marine type of policy.

Automobiles. Even if the vehicle is garaged in a facility that sustains property damage and the vehicle is damaged, the vehicle would be covered under its own auto insurance policy.

General Liability. Liability insurance would be covered under a liability policy. If your roof collapses and causes bodily injury or property damage to others, the building damage would be covered under property insurance and the bodily injury or property damage to others would be covered under a liability policy.

Flood. Flood insurance is typically excluded under all property insurance policies. This coverage may be purchased from your insurance broker through the National Flood Insurance Program or from a private flood insurance company, if available.

Earthquake. This insurance is also typically excluded under all property insurance policies (often named “earth movement”). This coverage may be endorsed back on to the policy by certain carriers, or may be purchased separately as an Earthquake or Difference in Conditions (DIC) policy.

This is not a comprehensive list of coverage or exclusions. Check your policy or schedule a risk management analysis with a Hayes Broker today to find out if you have the property coverage you really need.

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