Commercial Property Coverage provides insurance against financial loss due to damage or destruction of insured buildings and business personal property owned by the insured  (the business). Coverage for lost income and any extra expenses resulting from damage to the insured property may be included.  Property insurance is considered a "first party" coverage.  In other words, the policy provides coverage for your stuff and pays to replace or repair it.  It is intended to return the insured to the same condition immediately before the loss.    

What it Covers

Coverage is provided for direct physical loss to covered property.  Covered property includes buildings and contents.  Building coverage includes the building, permanently installed fixtures, machinery and equipment.  All attached refrigeration, heating, A/C, plumbing and process equipment may be covered under the building limit.  Business Personal Property, or Contents, includes stock, furniture, fixtures, unattached equipment and nearly anything else which can be carried out of the building.  Building rates are typically lower than content rates, so attached equipment should be listed as "Building" rather than "Contents" to help control cost.   Business Income & Extra Expense coverage is designed to replace normal operating income, ongoing expenses and any extra expenses necessary to continue business operations after a covered loss to insured property.  

The standard coverage form attached to the property policy provides coverage for all perils except those specifically excluded (also known as the All Risk Policy and Special Form Coverage).  Standard exclusions include war, flood, earthquake, employee theft, mechanical breakdown, pollution and government acts.  Coverage can be purchased for some of the standard exclusions.  Others perils are only provided limited coverage such as water damage and utility failure.  Variations in covered perils are common among different insurance companies, be sure to read your coverage form for an exact description.    The standard perils which nearly all property policies cover include:  fire, windstorm, hail, theft, vehicle & aircraft damage; lightning; vandalism.

Coverage Extensions and Additional Coverage  

In addition to the limits stated in the Building and Personal Property coverage form, the policy has a coverage extensions section and an additional coverage’s section. The coverage extensions section provides limited coverage for newly acquired or constructed property, property of others, certain outdoor property, and the cost to research and reconstruct information on destroyed records. Extensions for property in transit and certain water damage are also included.   Another common, and often overlooked, extension is for sewer & drain backup.  This is normally excluded under the standard flood exclusion, so be sure to look for it in your policy.  The limits provided for these additional coverage's vary widely among insurance companies.  Often, an endorsement is included offering many additional coverage's and extending these standard coverage's for a flat charge.  These are displayed as a link on your proposal when available.

Who is Covered

As a first party coverage, the commercial property policy covers the named insured.  However, it may be endorsed to provide some additional coverage where required.  First, any mortgage or lien holder with an interest in your property may be included as an additional insured.  This will entitle them to direct payment to satisfy a loan or note in the event the property is damaged or destroyed.  Also, you may select to provide some limited coverage for property of others.  If you regularly take control of others property for storage or repair, this would be an important coverage.  A separate limit is provided and any loss payment is made directly to the owner of the property.

Limits of Insurance

Separate limits are provided for each building and its contents.  Valuations of lost property are made at the time of loss.  This makes it very important to select the proper amount of insurance each year.  Property values change with inflation and construction costs.  All policies issued through InsurancePoliciesOnline.com use Replacement Cost coverage.  In the event of a total loss, this provides for the replacement of a piece of old property with new of like kind and quality.  Partial losses are paid at the actual cost of repair.  The alternative to Replacement Cost is Actual Cash Value (ACV) coverage.  Actual Cash Value will pay based on the depreciated value of the damaged property.  This includes partial losses.  

Business Income & Extra Expense limits are also provided separately.  To properly select a limit, a business income worksheet should be completed.  This can also be a useful tool in developing a disaster recovery program for your business.  Many of the policies provided to small business owners automatically include Business Income coverage on an Actual Loss Sustained basis.  This is the best form of coverage available.  It is written without a limit of insurance.  Business Income and Extra Expense losses will be paid for twelve consecutive months following a covered loss.  The actual loss will be paid based on financial records of the business.

Additionally, a coinsurance clause may apply to all limits.  We endeavor not to use property policies which include a coinsurance clause.  Anytime that one is on a quoted policy, it will be stated on the proposal.  The standard limit is 80%.  Coinsurance is a tool used by the insurance industry to make certain that adequate limits of coverage are carried on property.  Basically, it requires that any item is covered for at least 80% of its value at time of loss.  If the limit is inadequate, the amount paid for a claim will be reduced.  The formula for determining a penalty is as follows:

1. Find the required amount of coverage on the item -- multiply the value at time of loss by the coinsurance percentage.

2. Divide the required amount, by the amount of coverage carried.

3. Multiply that amount by the total loss to determine the amount payable

Deductible  

The standard deductible is $250. However, other deductible amounts are available and the deductible applies only once per loss.  High10er deductible amounts will help reduce your premium.  Earthquake coverage is subject to a separate deductible, usually stated as a percentage of the coverage amount.  Deductibles of 5-10% are common with some carriers offering flat dollar deductibles of $25-50,000 depending on the total values insured.  Business Income deductibles are usually expressed in hours or days.  Typical waiting periods are 24-72 hours following the loss.

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