Commercial Property Insurance: Cost, Coverage & Where to Find

Commercial property insurance covers businesses for losses due to certain covered events, such as fire, theft, vandalism, or natural disaster. This coverage helps business owners protect their valuable assets, such as an owned or leased building, tools, equipment, machinery, or inventory. Commercial property insurance rates typically average $500 to $1,000 per year.

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Commercial Property Insurance Rates

The cost of business property insurance varies depending on the value of the property to be insured, the location of the business, and the coverage limits and deductible you choose. There are several other factors affecting the cost of commercial property insurance, but most small businesses will pay $500 to $1,000 per year in premium.

Some insurance providers will allow you to include commercial property insurance in a business owners policy (BOP), which is a bundled package of multiple insurance types. The cost of the package as a whole is often less than the underlying policies if purchased separately.

The most important factors that affect the cost of business property insurance include:

• Geography: Everything from the land value of your business location to local crime rates can impact the annual cost of your premium.
• Safety and Security: This expands on the geography and location aspect. Is your commercial property located in a high crime area? Are there hazardous materials stored in your building or nearby?
• Size of Business Premises: A large commercial building will generally cost more to cover than a single unit office space.
• Age of Building: Old buildings can be more susceptible to certain types of damage, so they may cost more to insure. For example, a fire caused by old electrical wiring could translate into costly repairs if the building needs to be rebuilt to code.
• Type of Equipment: Heavy industrial equipment will cost more to insure than an at-home business’ sewing machine.
• Age of Equipment: You may pay higher premiums if your equipment is hard to repair because of scarce parts or if it’s more likely to break down because of heavy use.

Insurance companies will charge more for greater risk exposures that require higher coverage limits. It’s important to remain aware of the risk exposures of your business and the assets that you need covered.

Commercial Property Insurance Providers

When you begin looking for business property insurance, you may speak with a captive insurance agent, an independent agent, or with a broker. Captive agents work with just one provider. Independent agents may represent multiple insurers, and brokers only represent the client, not a provider.

In no particular order, here are five insurance companies we’ve researched that provide commercial property insurance to small business owners:

1. The Hartford

The Hartford is a Fortune 500 company based out of Hartford, Connecticut. Although they are one of the largest firms in the United States, The Hartford does an exceptional job of catering to the insurance needs of small business owners. The Hartford’s commercial property insurance offers broad coverage or a tailored package to fit your needs.

2. Insureon

Insureon is an online insurance provider that offers tailored and direct insurance quotes to small business owners. If you don’t prefer a brick-and-mortar company, Insureon may be a good fit for you. Insureon’s commercial property insurance covers your business property that is stolen, damaged, or destroyed.

3. Insurance321

Insurance321 is an online insurance marketplace that offers tailored, and direct insurance quotes to small business owners. Insurance321 connects you with agents, brokers, and carriers to find the best commercial property insurance to cover your business property that is stolen, damaged, or destroyed with a quote in as little as four minutes.

4. Nationwide

Nationwide is another large insurance company that offers a wide variety of insurance solutions to small business owners. Depending on the terms of your policy, Nationwide’s commercial property insurance may cover natural disaster, theft, accidents and more. They also provide customized solutions and plenty of resources for educating business owners on how commercial property insurance works.

5. Allstate

Allstate is a large, highly rated insurance company that provides solid, basic coverage with the add-ons that many small business owners need. They offer commercial property insurance, but their best package for small businesses is their business owners policy (BOP).

Tips on Applying for Commercial Property Insurance

Commercial property insurance is fairly common in the small business insurance market, but it is not a one-size-fits-all policy. This means that coverage and rates will vary depending upon the business or industry type, the property types, the valuation of assets, coverage limits, and deductibles.

Here are some valuable tips from professionals with knowledge on commercial property insurance:

Use an Agent or Broker Who Understands Your Business

Commercial property insurance is a type of small business insurance and is not specific to any particular industry. Keep in mind that not every insurance company will have intimate knowledge of your business or the risk exposures that need protection. When shopping for a commercial property insurance policy, try to find an agent or broker who understands your business or industry type.

According to Tom Drennan, Commercial Litigator, Dinsmore & Shohl:

“For a small business owner, it is important to consult an insurance broker or agent who has the ability to analyze the business and procure a commercial property policy that meets that business’ specific needs. Commercial property insurance is not one-size-fits-all, and it is important to ensure that the coverage is tailored to the business’ specific risk profile. Also, it’s important that the insurer that ultimately issues the policy is financially strong, with an excellent reputation for claims service.”

Let the dedicated agents at Insurance321 find the right commercial property policy for your business. Insurance321 is a marketplace that pairs your business with agents, brokers, and carriers to find you the policy that meets your businesses needs. Get started with a free quote today.

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Get the Appropriate Coverage Amounts

It’s better to be overinsured than underinsured. However, it’s smart to know how much coverage is needed to properly protect against the most common risk exposures. Therefore, spend time identifying which coverage types you need first, then shop for the best value. Leaving significant risk exposures uncovered can potentially bankrupt your business. But paying too much is not good business either.

According to Steve Pritchard, Founder, Cuuver.com:

“As a small business owner, it might be unrealistic for you to be able to afford to insure every single physical asset your business possesses. If this is the case, you should consider only insuring the things that are most valuable to your business. Which assets are the most important to the business? Which would cost you the most to replace? Which would be the most damaging for you to lose? A small business probably won’t need its stationary to be covered, but losing your computer could be devastating. Prioritize your assets and see if you can tailor a policy that covers the highest in priority.”

Reduce Costs by Bundling Coverage Types

When possible, bundle your coverages into one package to get the protection you need at the right price. For example, most small business owners need general liability and commercial property insurance. Many insurance companies will offer a business owners policy (BOP), which combines both coverage types into one package at a lower rate than buying them separately.

According to Andrew J Gibbs, Attorney, Lindabury, McCormick, Estabrook & Cooper, P.C.:

“Work closely with your insurance broker to itemize assets, including real property, equipment and inventory, and to purchase insurance based upon the property’s actual value (replacement cost minus depreciation) or its replacement value (cost of replacing the item without deducting for depreciation). Business owners should also consider a Business Owners Policy (BOP), which is a ‘package’ policy that combines commercial property insurance with other types of coverage. The BOP typically costs less than if a company purchased a number of separate policies.”

How Commercial Property Insurance Works

A commercial property insurance policy is non-industry specific, which means that the coverage is mostly standard across all business types. However, commercial property insurance is not a one-size-fits-all product. Policies will differ in a few key areas, such as the coverage limits, how assets are valued, and what’s covered and not covered in the policy.

What Commercial Property Insurance Covers

Your insurance policy will cover certain perils, which are causes of damage such as fire or theft. Coverages included in your policy are called inclusions, whereas perils not covered in your policy are called exclusions. It’s important to know what is covered in your policy and what is not covered.

Here are some of the primary items covered in a commercial property insurance policy due to loss from a covered peril:

• The building, owned or leased
• Business equipment loss
• Damage or loss due to wind, hail, fire or theft
• Accidental damage of property
• Business Interruption (lost business income)
• Electronic data
• Interruption of computer operations
• Valuable papers and records
• Forgery or alteration
• Accounts receivable

Of the covered items in a commercial property insurance policy, the most important items to cover are the building and the business’ assets contained within it. Business interruption, which covers a loss of income when your business is forced to suspend operations due to a covered event, is also necessary coverage in the property insurance policy.

Commercial Property Insurance Exclusions

You, as the insured small business owner, have the ability to choose to include or exclude a range of potential perils, and you should talk to your insurance agent or broker to determine the appropriate coverage for your business. There are several perils and items not commonly covered in a commercial property insurance policy unless you specifically add them.

Here are some the common perils and items not covered under commercial property insurance:

• Earthquakes, floods and volcanoes
• Weather (other than wind and hail)
• Errors or omissions
• Commercial vehicles
• Data breach from cyberattack
• Acts of war

The covered perils, or the covered causes of loss, should be specified in your policy. When you discuss commercial property insurance coverage with an insurance agent or broker, you’ll need to determine if you want coverage on an “all perils” basis or a “named perils” basis. All Perils covers everything except for the specified exclusions. Named Perils policies list exactly what is covered.

Commercial Property Insurance Coverage Limits

Commercial property insurance coverage can have either a specific limit or a blanket limit. For example, you can cover assets at specific limits, such as $1 million for your building and $500,000 for contents. A single blanket limit of $1.5 million can cover all assets and it can cover multiple business locations under one limit. Your actual limits will vary depending upon the value of your covered property.

Actual Cash Value vs. Replacement Cost

An important factor in commercial property insurance coverage is how the business assets are valued. Business assets can be valued either at actual cash value or on a replacement cost basis. The valuation will determine how much you will paid for a claim. Therefore, it is important to understand the difference between the two valuation types.

Actual Cash Value

Also known as ACV, Actual Cash Value is the amount the insurance company will pay you based upon the depreciated value of the property at the time of the loss. In different words, ACV will get you the value as if the property were sold to the general public, as in an ad in the paper or a garage sale.

Replacement Cost Value

Replacement Cost Value (RCV) will reimburse you with payment that is equal to price required to replace the property that is damaged or stolen. Replacement cost will get you more than actual cash value because you will receive the payment necessary to replace the damaged or lost item. However, RCV will cost more in premium than ACV.

The decision to choose between Actual Cash Value (ACV) and Replacement Cost Value (RCV) for the valuation of your commercial property comes down to risk and cost savings. For example, ACV will not provide full cost to replace your property if you have a claim, but it will cost less in premium. RCV will be more expensive but will fully replace your property.

Who Business Property Insurance Is Right For

Small businesses that own or lease office space or assets valuable to the operation of the business will need commercial property insurance. Many small business owners have commercial general liability (CGL) coverage. However, the CGL policy covers only third-party claims for bodily injury, property damage, medical payments and personal and advertising injury. Business owners with assets also need to cover their own property.

According to Marc Loud, Partner, Park Insurance:

“Any business owner who has either commercial assets, owns the property, or who is responsible under the terms of a lease needs commercial property insurance. It’s also important that business owners are aware that the vast majority of leases make a commercial tenant responsible for repairing the building in the event of damage. And with the cost of information technology increasing, business owners need to think more carefully about insuring buildings and contents.”

Bottom Line

The standard commercial property insurance policy will cover losses due to certain covered perils, such as fire, theft, vandalism, or natural disaster. This coverage is needed by business owners who need to protect valuable assets, such as building, tools, equipment, machinery, or inventory. Most small business owners can get coverage for less than $1,000 per year from many national insurance providers.

To help you find the best commercial property policy, Insurance321 has a robust marketplace. Let their team of experts find the right policy by connecting you with agents, brokers, and carriers. Get a free quote today, and get your business insured.

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