Did you know that 40% of small businesses affected by a natural disaster end up permanently shutting down? Even worse, approximately 75% of small to medium businesses have no disaster plan. This usually also means that they have little to no insurance as they have not correctly identified risks that face their business.
Although a business closure due to a natural disaster or some other event seems hard to imagine, it is often better to be safe than sorry. While we cannot prevent these disasters, we can minimise the damages and effect they have on being able to remain in business. One means of achieving this is by securing commercial property insurance.
This is a smart investment that will protect your business and its physical assets.
Whether you’re a first-time or a veteran business owner, looking for insurance can be challenging. Here’s everything you need to know about commercial property insurance.
Commercial Property Insurance Contents
Commercial property insurance is an insurance product designed to protect businesses from loss against events affecting their buildings and properties leading to property loss.
These events usually include fires, explosions, theft, vandalism, and damages from vehicles. You can also add additional coverage for events such as earthquakes, floods, and broken glass if your business needs specific coverage for other events.
Commercial property insurance for small business will pay for restoring all your damaged, lost, and stolen properties. This will allow your business to rebuild and continue operating, following an insured event.
There are two ways a commercial property insurance plan can pay for your losses. Your insurance coverage can be either for replacement cost or an agreed value.
The amount needed to repair, replace, or repair damaged properties is the replacement cost. It doesn’t deduct any amount for depreciation. Comparable materials and quality are also used to estimate the repair cost.
If you want to replace your properties with similar quality, agreed value may be a better option. However, it subtracts depreciation from the value.
To find out which insurance cover suits your business, you can speak to an insurance broker to help you out.
Every smart business owner knows that they need commercial property insurance. Even businesses with property leases are also advised to get insurance.
Here are some types of business owners that need to insure their properties:
- Building owners, this will secure their funds for repairs and rebuilding of their properties.
- Tenants of commercial properties are also encouraged to have insurance.
These tenants are responsible for the risks of their occupied square footage.
- Commercial real estate investors should also consider commercial property insurance.
Another term for commercial property insurance coverage is “lessors’ risk.” It is the covered cost for the replacement and repair of property damage. This damage results from vandalism, fire, explosion, water damage, and some natural disasters. Some policies only cover the building while other policies include furniture, supply, equipment, and inventory.
Commercial property insurance covers four main types of property damage. These are the following:
- The building space. This insurance will pay for the replacements or repairs of the building. This applies to both owned and leased buildings. Affixed items like furnaces, electricity, and plumbing are also included.
- The building’s contents. These include tangible properties like inventory, supplies, and furniture.
- Other people’s assets. This insurance secures properties controlled by the business.
- Signs and marquees. A commercial property insurance pays for their repair or replacement. This applies to both fixed and free-standing signs.
Be Aware Of What Is Not Covered
Some unexpected events are not included in basic policies. Keep an eye which of these events may affect your business and then consider adding them to your insurance policy. Events could include floods, earthquakes, normal wear and tear, dishonest employees, and accidents of unregistered vehicles.
When considering insurance, it is advisable to speak to an expert, such as an insurance broker to ensure that you have coverage for the risks that face your business.
Depending on your business needs, you might consider adding extra coverage to protect your business and its properties.
Here are some endorsements to consider:
- Natural events.
Natural disasters such as floods, cyclones, and earthquakes are usually not covered by a basic policy. If your business is within a disaster-prone area, this endorsement is a must.
- Income loss.
This endorsement will be a lifesaver if a disaster happened during big-income events. You should also consider adding this coverage if you have high-income sales.
- Specialised equipment.
Some modern and expensive equipment are not covered by basic policies. This insurance needs to be considered by businesses that operate specialised equipment.
It is possible for some small business owners to pay less than $1,000 for commercial property insurance. However, this figure will be different for every business. Each business will have their own insurance policies, value, and risks.
To have an idea on how much your property insurance will cost, here are some factors you can consider:
- The type of business.
Businesses with shops and offices must pay more for insurance than online businesses. This is because they are more prone to visible damages. However, online businesses might also pay more if they have unique or expensive data.
- The type of industry.
Some industries like restaurants have higher risks of property damage than others.
- The specific location of your business.
For business within high-crime areas, the cost of commercial property insurance will vary.
- The quality of the property and construction materials.
Businesses with fire safety equipment with buildings that is made with high quality construction materials will get discounts. This is because their risk levels are lower than those without such features.
- The type of neighbouring facilities.
When your business is near risky properties, it affects your insurance cost.
When your business assets are insured, the recovery process after an unexpected loss is much faster. The longer a disaster’s impact lingers, the more difficult it is to get back to business.
A commercial property insurance prevents that from happening. From repair costs to bills and payrolls, your commercial property insurance will support you until you’re back on your feet.
By now, you are well-aware of how commercial property insurance protects your assets from unexpected disasters. However, another advantage of this insurance is that it is a tax deduction for your business. This is because insurance allows one to conduct a business or trade.
Another advantage of commercial property insurance is its flexibility. Different coverage can be combined into a single policy. This unified policy is more convenient and cost-effective than separately purchasing each type of insurance coverage.
Before buying a commercial property insurance policy, ensure that you have done your research about this type of insurance and how it works. Consider asking other business owners in the same industry about the coverage of their insurance and how suited it is for their business.
To apply for commercial property insurance, you will need to provide all the key information about your business. You must also secure a list of all the properties that your business owns.
Here are some of the basic information you’ll need to apply for a commercial property insurance:
Physical features of the building
- Type of construction material used
- Number of windows
- Fire safety equipment like alarms, sprinklers, and extinguishers
- Age of electrical and heating equipment
- Age of roof
- Type of fencing, landscape, signs, and other outdoor features
- Recent building renovations
Office and manufacturing equipment – both leased and owned
Aside from the assets listed above, you must also prepare key papers like a lease certification and a copy of the mortgage. You will also need documents for personal information like your social security number. A copy of the declaration page of your latest insurance is also handy if you’re already insured.
Insurance brokers will also ask you a few questions. They will ask about your neighbors and the risks of their daily activities. They will also ask questions about previous insurance losses.
After completing the pre-application process, your insurance broker will recommend the appropriate coverage. He or she will be responsible for filling out applications and submitting them to insurers.
These insurance companies will now provide you with insurance quotes. These are the estimates of how much you’ll pay with a potential insurance partner. However, these can change depending on the amount of data you gave upon inquiry. Therefore, it is better to provide insurers with enough information about your business.
After collecting quotes, your broker will help you choose which option is the best for you.
Commercial property insurance doesn’t stop at you buying it and forgetting about it. Like all insurance policies this is not a set and forget process.
Businesses change over time, therefore, it is important to check if your insurance policies are still working well with the changes. Over time, you might need more endorsements or to adjust your limits.
Discussing these concerns once a year with your insurance broker would be the best move.
Effective insurance brokers tailor insurance policies based on their clients’ needs. Here are some factors to consider in looking for an insurance broker
1. Their level of service.
- Do they respond fast in times of emergencies?
- Do they offer excellent claims services?
If an insurance broker ticks both boxes, then you’re off to a good start.
2. Their experience.
Do they have enough experience to properly advise you and decide which policies will meet your needs.
3. Risk management.
A good insurance broker will guide you through the identification of hazardous situations or risks that face your business. They will also check your businesses occupational and environmental risks.
By doing these, your business can then reduce its potential losses by having appropriate insurance cover preventing possible loss.
By using an insurance broker, getting a commercial property insurance policy that covers your individual needs will be much easier.
Ready to take the next step in securing your business commercial property insurance?
Fleurieu and Hills Insurance is known for their fast response, comprehensive quotations, experience, and have multiple payment options. Get in touch with us and see one of our highly-trained insurance brokers. Protect your business and be one of the many secured partners of Fleurieu and Hills Insurance today.