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Commercial Property Insurance

Amy Danise

Commercial property insurance protects a business's building, property inside the building, and items on the exterior such as signs. Damage from fire, hail, vandalism, leaks from sprinklers, sinkholes and volcanic eruptions is typically covered. Even damage from a car or airplane that crashes into the building is generally covered.

Small business owners often buy commercial property coverage by combining it with business liability insurance and other coverage types in a business owners policy (BOP).

There are typically three flavors of business property insurance, although coverage can vary among insurers. Below are three types of commercial property coverage defined by the Insurance Services Office, which offers standardized policies used by many insurers. (Your insurer might use different policy forms.) A business insurance agent can help you pick the right policy for your needs and budget.

  1. Basic causes of loss (form ISO CP 10 10). See an example of this policy.
  2. Broad causes of loss (form ISO CP 10 20). See an example of this policy.
  3. All risks coverage (form ISO CP 10 30). See an example of this policy.

Basic causes of loss

Covers damage from the perils listed in the policy: fire, lightning, explosion, smoke, windstorm, hail, riot, civil commotion, aircraft, vehicles, vandalism, sprinkler leakage, sinkhole collapse and volcanic eruption.

Broad causes of loss

Covers damage from the perils named in the policy, which are the perils in the basic form (see above) plus: falling objects; weight of snow, ice, or sleet; water damage (from leakage from appliances); and collapse from certain causes.

All risks coverage

Covers damage from any problem except those specifically excluded.

What's not covered by commercial property insurance

It's important to know what's not covered by a business property insurance so you don't get a bad surprise if you try to make a claim that's rejected. Your agent can help you understand what's excluded.

These problems (and others) are generally not covered by commercial property insurance:

  • Floods.
  • Earthquakes.
  • The enforcement of any ordinance or law -- such as an order requiring a property be torn down.
  • Governmental actions -- such as seizure of property.
  • Nuclear reactions or radiation, or radioactive contamination.
  • The failure of a power or utility service (but may be covered in certain cases outlined in the policy).
  • War and military action.
  • Flood, mudslide, sewer backups and other specific water problems.
  • Fungus, wet rot, dry rot and bacteria (but may be covered in certain cases, such a fungus resulting from a fire).

Your business insurance agent can tell you if there are endorsements or other insurance policies available that can fill coverage gaps, such as:

  • Commercial flood insurance.
  • Earthquake insurance.
  • Business income coverage.
  • Extra expense coverage.
  • Other policies for water damage at a business.

Commercial property insurance cost

The only way to really know what commercial property insurance will cost is to get business insurance quotes. Your cost will reflect the specific characteristics of the business, such as:

  • Size and age of the building.
  • Risks for the location, such a weather and crime.
  • Equipment types and age. The more expensive your equipment, the higher the insurance cost.
  • Whether you choose replacement coverage (pays for new items) or actual cash value coverage (pays depreciated value for items damaged).
  • Discounts, such as buying property insurance along with other coverage in a business owners policy (BOP).