Commercial property insurance guide

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Commercial property insurance pays to repair or replace your building and business property damaged by a fire, storm, or other event covered by the policy. It can also pay some of your lost income if your business is unable to operate normally.

Learn more by watching: Starting a business? What you need to know about business insurance

Coverage options

There are three different levels of commercial property coverage. Each level protects against different causes of damage or loss.

• Basic form policies provide the least coverage. They usually cover damage caused by fire, windstorms, hail, lightning, explosions, smoke, vandalism, sprinkler leakage, aircraft and vehicle collisions, riots and civil commotion, sinkholes, and volcanoes.
• Broad form policies usually cover the causes of loss included in the basic form, as well as damage from leaking appliances, structural collapses, falling objects, and weight of ice, sleet, or snow.
• Special form policies provide the most coverage. These policies usually cover damage from all causes of loss, except those specifically listed in the policy. These are called policy exclusions. Most policies exclude damages from floods, earth movement, war, nuclear disaster, wear and tear, and insects or vermin.

Replacement cost vs. actual cash value coverage

Commercial property policies provide either replacement cost coverage, actual cash value coverage, or a combination of both. To be fully protected, make sure your policy provides replacement cost coverage.

• Replacement cost coverage pays to repair or replace your property at current costs. This means the policy will pay enough to rebuild your building and replace your property with new items, even if the cost is more than what you originally paid.
• Actual cash value coverage pays replacement cost minus depreciation. Depreciation is a decrease in value because of wear and tear or age. If you have actual cash value coverage, the policy might not pay enough to fully rebuild your business.

Other coverages you might need

Flood insurance

Most commercial property policies don’t cover damage from flooding. To be protected from flooding, you’ll need to buy a separate flood policy. You can buy flood insurance from insurance companies that sell it or from the National Flood Insurance Program. Talk to your insurance agent or visit FloodSmart.gov.

There’s a 30-day waiting period after you buy a flood policy before the coverage goes into effect.

Learn more: Do you need flood insurance?

Windstorm and hail coverage on the Gulf Coast

If your business is on the Texas coast or in Harris County on Galveston Bay, your policy probably doesn’t cover wind and hail damage. The Texas Windstorm Insurance Association (TWIA) offers wind and hail coverage for coastal residents and businesses. You can buy TWIA coverage through your insurance agent. Depending on where you live, you might need flood insurance before TWIA will sell you a policy. For more information, visit twia.org or call 800-788-8247.

Don’t wait until the last minute to buy wind and hail insurance. TWIA won’t sell you a policy if there’s a hurricane in the Gulf of Mexico.

Auto coverage

Commercial auto insurance includes liability and property damage protection for cars, trucks and vans that you use for business. It can also cover food trucks, service utility trucks, trailers, and other types of vehicles.

Crime coverage

You can buy coverage to protect your business from several types of crime. Common crime coverages include:

• Robbery and safe burglary.
• Forgery and alteration.
• Employee theft.
• Cyber crime.
• Money and securities, which insures money, securities, and other property against losses that happen on or off your business site.

Inland marine coverage

Inland marine coverage covers property kept on land, not on water, despite its name. Inland marine coverage covers:

• Accounts receivable.
• Computers.
• Contractor equipment.
• Fine art.
• Property in transit.
• Valuable papers.
• Property held for others.

If your business uses property that isn’t covered by your commercial property policy, ask your agent about inland marine coverage.

Additional coverages

Most companies offer coverages that you can add to your policy for an extra cost:

• Business interruption coverage pays for the income you lose if your business can’t operate normally because it was damaged or destroyed.
• Extra expense coverage pays additional costs to return your business to normal after it's damaged.
• Newly acquired or constructed buildings coverage insures a new building if you add it to your policy. You usually must add the new building within 30 days after starting construction or acquiring it.
• Valuable papers coverage provides limited coverage for your business records and other valuable papers.
• Ordinance or law coverage pays extra construction or repair costs to meet current building codes.
• Boiler and machinery coverage covers boilers, air conditioning units, compressors, steam cookers, electric water heaters, and similar machinery.

Shopping for commercial property insurance

Coverage and rates vary by company, so it pays to shop around. Use these tips to help you shop:

• Compare apples to apples. When comparing prices, make sure you're comparing policies with similar coverage. A cheaper policy might provide less coverage.
• Tell your agent about all your worksites to make sure you’re fully covered.
• Keep shopping if an insurance company turns your down. Insurance companies have different standards for deciding whether to sell someone a policy. You might be able to find a company willing to insure you even if another company won’t.
• Consider factors other than price. An insurance company’s financial rating indicates how strong the company is financially. Its complaint index is a measure of its customer service. To learn an insurance company’s financial rating from an independent rating service and its complaint index, call our Help Line at 800-252-3439 or Look up a company.
• Buy only from licensed companies. If you buy from an unlicensed company, your claims might not get paid. To learn whether a company or agent is licensed, call our Help Line or Look up a company.

Learn more: How to shop smart for insurance

Saving money on your insurance

Use these tips to help you save money:

• Remove potential hazards. Improving the safety, security, and maintenance of your workplace might lower your risk for having a claim, which can help you save money on your premiums. Most insurance companies also offer loss-control or risk-reduction services. Talk to your agent about ways to make your workplace safer and more secure.
• Combine coverages into one business owner’s policy. Many insurance companies offer business owner’s policies that bundle multiple coverages together. They’re usually cheaper than buying the coverages separately.
• Choose your deductibles wisely. A deductible is the amount you have to pay toward your claim before the insurance company will pay. Policies with higher deductibles have lower premiums. But remember that if you choose a higher deductible, you’ll have to pay more out of pocket if you have a claim.

Learn more: What to know about deductibles