If you own or operate commercial property, you already know that it doesn’t take much to put your investment at risk. One accident, one natural disaster, one mishap, and you could find yourself in a world of debt.
That’s where Commercial Property Insurance comes into play.
A Commercial Property Insurance policy covers direct physical loss or damage to whatever property, goods, and infrastructure falls under the policy’s protection. Note that the coverage is tied to the premises in question; any loss must occur on the premises in order to be covered.
For the purposes of a policy like this, a building isn’t just a single structure. Rather, a “building” can include not just a specific structure or structures – a warehouse, office, workshop, etc. – but also the following:
- Additions to the structure
- Equipment and machinery that is permanently installed at the site
- Equipment and infrastructure used to maintain the site
Covered Contents and Personal Property
When it comes to what is considered “personal property” under Commercial Property Insurance, coverage extends beyond just the contents of a business location. Any of the following could be considered property for purposes of coverage, provided it is inside the building or within specified distance of the site:
- Equipment, machinery, and goods necessary for the running of your business
- Materials or services you provide for others, including on/to their personal property
- Furniture and other infrastructure
- Any personal property used for your business
- If you rent or lease, your share of improvements and betterments made to the site
- Leased property you are obligated by contract to insure
Contents and Personal Property NOT Automatically Covered
Not all property related to your business is automatically covered. Most of the below list may not be covered in a standard Commercial Property Insurance policy. However, in some cases coverage for the following may be available under a different type of policy. Contact us for other insurance options.
- Accounting / bookkeeping paperwork
- Paved surfaces (walkways, patios, etc.)
- Anything used for illegal activities
- Paper money and other currency or securities
- Animals related to your business
- Digitally-stored data
- Below ground building foundations
- Lawns, landscaping and crops
- For waterfront property: bulkheads, docks, piers, and pilings, piers
- Property already insured under another policy
- Retaining walls that are not part of a covered building
- Replacement and restoration costs related to destroyed paper records
- Underground pipes, drains, and related infrastructure
- Vehicles used off-site and/or on public roads
- Certain types of infrastructure, such as television antennas, satellite dishes, etc.
Understanding “Open Peril” and Natural Disasters
Business Property Insurance can be written to cover physical loss for things that are not excluded under the policy’s provisions. Flood and earthquake-related damage is not covered. However, losses related to fire, smoke, lightning, ice and snow damage, structure collapse, vandalism, wind and hail, and some other types of damage generally are covered.
A way of reducing insurance costs is to have higher deductibles. However, you should only have a deductible as high as you can afford to pay in the case of catastrophic loss. Ideally, a balance between deductibles and insurance premiums should be struck. We can advise you in that regard so you make the most of your insurance investment.
Certain types of “perils” are NOT covered under policies like this. These exclusions are designed because not all types of coverage are required for all clients (such as flood or earthquake coverage); because some coverage is provided under different contracts (auto insurance, for example); because some loss can be avoided if proper action is taken by the client (wear and tear on equipment, damage resulting from lack of maintenance, etc.); and so on.
Claim Settlement Basis
In the case of a claim, claims may be settled in the following ways:
Actual Cash Value: Under an Actual Cash Value claim settlement, any property loss is settled based on the real cost to replace the property, measured at today’s cost, with a standard deduction incorporated for depreciation and/or obsolescence.
Replacement Cost: Under Replacement Loss, losses will be settled on a “New for Old” basis. This means there are no deductions for depreciation.
Co-Insurance: Your business policy will likely have a clause that requires you to carry protection equal to 80 or 90 percent of the basis of claim settlement. Failure to maintain this coverage may limit claim settlement.
Explore our page further to review the varied types of business insurance and the industry specific exposures you may need to protect yourself from. To learn more about business insurance in New Jersey, contact one of our JF Murray insurance professionals today.