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What is commercial property insurance?

Commercial property insurance is an essential coverage for any business that occupies a physical space. It has two main components: building and contents insurance.

Building types that are covered by commercial property insurance include:

• Office buildings
• Retail stores
• Warehouses
• Manufacturing facilities
• Restaurants and cafes
• Medical offices

Plus, any other structures used for business operations.

Home-based businesses aren’t eligible for commercial property insurance (they require home-based business insurance, a specialized insurance product).

Examples of contents that are covered include:

• Inventory and merchandise
• Employee possessions
• Equipment
• Furnishings
• Fixtures
• Documents
• Computers and electronic
• Signs, fences, and landscaping

As a business owner, you should consider commercial property insurance if:

• You own or lease a commercial space
• You own or lease equipment for your business
• You have inventory in your commercial space
• You use computers, laptops, tablets, mobile phones, or machinery for business reasons
• You or your employees perform work or conduct business off-site

Commercial property insurance could result in significant savings in the event of an emergency. Having this type of insurance will protect you from paying entirely out of pocket to replace or repair your business assets or the building structure.

What’s covered by commercial property insurance?

Commercial property insurance typically provides financial protection for:

• Repairing damage to your commercial property that resulted from insured perils, like fire, theft, or flooding
• Replacing or repairing your business equipment, fixtures, or furnishings that were damaged or lost due to insured perils
• Replacing or repairing your goods and inventory that were damaged or lost due to insured perils
• Replacing or repairing your business electronics that were damaged or lost due to insured perils
• Any improvements you made to a commercial space that you’re leasing. This coverage applies when the improvements are made to facets of the space that cannot be removed, like lighting, paint, or carpeting
• Theft following a break-in or even employee theft. Items like cash and merchandise are covered

What’s not covered by commercial property insurance?

This type of coverage does not provide financial protection for:

• Wear and tear of your commercial property or equipment that results from regular use
• Lost items when you cannot explain the cause of the loss
• Damage caused by the failure to keep the property in a state of good repair
• Intentional acts of thefts carried out by the insured (the person named on the policy)
• Damage caused by events like floods or earthquakes (additional coverage may be available for this depending on location)
• Commercial property that you’ve left vacant for over 30 days. To get coverage for this situation, you’ll need vacant property insurance
• Aircrafts and watercraft vessels are excluded (coverage is available separately)

Types of insurance claims that are common in commercial property insurance

Business owners face a range of risks that could damage or result in the loss of their commercial space, equipment, or inventory. Many commercial property insurance claims result from disasters like fire, theft, flooding, landslides, or earthquakes. When purchasing a policy, make sure to ask your broker that your coverage will extend to perils that you believe your business is at high risk of facing.

Here are some examples of how commercial property insurance can save you money.

Protection from unexpected water damage

Let’s say you own a grocery store and keep the products in your inventory either in the retail space or a storage area. A pipe bursts overnight, and the storage area is flooded with more than 10 inches of water, damaging both the stored inventory and the storage area itself. Because the inventory in the grocery’s retail space is fine, you are able to keep serving customers without interruption while you repair the storage area and order new inventory.

Your commercial property insurance will cover the costs of repairing the storage space and replacing the destroyed inventory. These costs total $25,000 – an amount you would have had to pay out of pocket if you were not insured.

Note that you are entitled to your insurance claim, even though your business operations were not technically interrupted by the flooding.

Protection from burglaries

Now let’s say you own a bookstore. While the store is closed and no one is on the premises, burglars break in and steal $10,000 worth of computers and computer equipment.

If you have commercial property insurance, your policy will cover the costs of replacing the stolen items. Without insurance, you would have to draw on your own resources to buy new computers.

Your commercial property insurance policy also applies if only your commercial property – and not your equipment or inventory – is damaged. If your office is damaged by a fire but only structural repairs are needed, you can make a commercial property insurance claim to cover the costs of making those repairs.

How much does commercial property insurance cost?

The exact amount you’ll pay for commercial property insurance will depend on a variety of factors. These include:

• The value of your commercial property
• The location of the property
• The age of the property
• The state of the property’s plumbing
• The type of electrical work in the building
• Risks posed by adjacent or neighbouring infrastructure
• Your property’s occupancy, i.e., the maximum number of people (including employees, customers, clients, or vendors) that are allowed to be in your commercial space at any given time
• The value of your equipment
• The value of your inventory
• How much it would cost to replace your commercial space and its contents if it was destroyed by a peril covered by your policy
• The size of your business

In terms of how much property insurance costs per year, the figure will vary depending on the specific circumstances of your business.