Anyone who operates a business that uses physical assets needs commercial property insurance. Even service-oriented businesses like attorneys and accountants use equipment and inventory that need protection from the perils of a disaster.

A number of factors affect how much your commercial property policy costs. For example, installing safety features like sprinkler systems may lower your rate.

Buildings

Commercial property insurance covers the buildings and structures on your business premises — as well as furniture, equipment, computers, records, inventory and other materials you own or lease. It’s typically required by mortgage providers and leasing companies before you can secure financing or a lease for your business. The cost of a policy can vary, depending on factors like location and construction. A policy’s coverage limit can also impact the cost, as will whether or not your buildings are covered at replacement cost value or actual cash value (ACV). For more information, click on Insurance Agency Outsourcing Services.

Before meeting with an agent about a commercial property insurance policy, a company should take an inventory of its physical assets and get professional estimates for their replacement costs. This helps ensure that you’re not under-insuring your property, which can be costly if you’re forced to pay for repairs out of pocket. Risk assessments, loss control measures and other insurance strategies can help reduce your business property insurance rates.

Equipment

Commercial property insurance typically protects a business’s tools, equipment and inventory at the location where it is kept. Depending on the policy, this might include both owned and leased equipment. It also might extend to assets outside the building, such as landscaping, fencing and outdoor signs.

In most cases, a commercial property policy can cover the cost of replacing damaged equipment. It can also pay out for lost income if the business must close due to property damage.

This type of coverage doesn’t usually cover everything, however. Some items excluded from a commercial property policy might include normal wear and tear, flooding and earthquakes (although these risks can often be covered by separate policies). This policy does not typically cover the contents of a company’s vehicles or equipment on its way to a job site. For that, you might need equipment floater insurance or a separate policy called contractor’s tools and equipment coverage. This is sometimes referred to as inland marine insurance.

Inventory

Any business with inventory that’s critical to operations may benefit from carrying commercial property insurance. This coverage helps pay to restore and replace items like furniture, supplies and finished stock after a fire or other event.

The cost of commercial property insurance can vary widely and is based on the level of risk for the specific location, building type and assets being covered. Factors can include the local crime rate, land value and whether buildings are made from flammable materials. For some businesses, a business owners policy (BOP) can be a cost-effective solution while others prefer a stand-alone commercial property insurance policy with higher limits and broader coverage options.

Typically, commercial property insurance policies cover loss on an actual cash value or replacement cost basis. An insurance agent can help companies determine the right amount of coverage to purchase for their physical assets, including a thorough inventory of items. This is especially important before a policy is purchased, so the correct limits are in place.

Leasehold Improvements

It is important for a tenant to understand which property it owns and which it merely has a use interest in during the lease term. Ambiguous or inconsistent lease provisions in this regard can cause problems at loss time, especially if the overall building limits on the property policy are not high enough to cover the full replacement cost of the building as improved by the leasehold improvements upon completion.

In the case of a commercial building, it is important to make sure that improvements and betterments coverage is added to the CP 00 10 property insurance form or its equivalent. This coverage essentially extends commercial property to include those items that are not part of the structure and cannot be removed or moved, but that the tenant has a use interest in.

This is particularly important when constructing leasehold improvements under a lease work letter where the landlord may require that the landlord carry construction project insurance. It is also important to confirm that the builder’s risk sublimit on the property policy will be sufficient to cover the anticipated value of the leasehold improvements being constructed under the work letter.