Without it, if the worst happens you better have some deep pockets

Key takeaways:

  • Smart, successful businesses make sure they have the right insurance in place
  • If you lease space for your business, it’s your responsibility to protect your assets; your landlord’s insurance only protects the building
  • Unless your pockets are deep enough that you could cover losses from theft, fire, vandalism, and other perils, you need commercial property insurance
  • Commercial property insurance is surprisingly affordable – especially when you consider the alternative.
  • The costs without commercial property insurance are high. Just a single incident of vandalism costs an average of $3,370.

When you own a business, you want to do everything you can to help it succeed. That involves everything from a sound business plan to providing the exact products or services your customers want. You’ve worked hard, and it shows.

But life is full of surprises. You can choose to be optimistic: A tornado may drop a bag of money on your roof. However, it’s more likely to drop a tree limb or shear off shingles. We encourage looking on the bright side of life but caution that you can’t ignore potential risks that could destroy everything you’ve worked for.

Among all the other things you do for your business, the importance of commercial property insurance can’t be overemphasized. And while you might see insurance as just an expense, the protection it offers goes far above any premium. Look at it as an investment. Unless you have bottomless pockets, the impact of an uninsured loss–to both you and your business–can be devastating. Let’s explore commercial property insurance; what it covers, what it doesn’t, what it costs, and your options.

Commercial property insurance protects businesses

If you have four or more employees, when you started your business, you were required by the State of Florida to purchase workers’ compensation insurance. And if you use your vehicle for company business, you must have commercial auto insurance. Those are just minimum requirements and do nothing to protect your business in a catastrophe.

You need insurance that protects your building and its contents. If you lease your location, you might think the building owner’s insurance covers you as well. But that is not the case. The landlord’s insurance will only cover damage to the building and will not reimburse you for the loss of your property inside that building.

This is why commercial property insurance is essential. Without it, you could lose everything you’ve worked hard to build. Whether you own the building or are a tenant, you will want coverage that protects your assets and helps you rebuild your business if disaster strikes.

A commercial property insurance policy will help pay for damage or loss from any named perils, which include fire, theft, vandalism, wind damage, and burglaries, but not normal wear and tear or natural disasters. Wind damage coverage is important for South Florida businesses, which can be vulnerable to windstorms such as hurricanes. Be aware, though, that hurricane coverage is specifically not included in your commercial property insurance policy. Hurricane insurance is available, though, so talk to your agent.

Your commercial property insurance will cover the contents of your business, but only business personal property is covered, and this property must be kept in a specific location. So if you have business items in storage or keep anything for your business in your home, such as accounting records, inventory, etc., you will need to extend coverage to those locations. Talk to your agent about multiple location coverage. 

Your commercial property policy covers pretty much everything that’s moveable inside the building, including:

  • Office supplies: pens, calculators, tape dispensers, staplers, paper
  • Furniture: chairs, desks, conference tables, file cabinets
  • Furnishings: rugs, blinds, drapes, whiteboards
  • Computers: this includes laptops, desktops, servers, monitors, keyboards
  • Electronics: mobile phones, tablets, televisions 
  • Heavy equipment: forklifts, hydraulics, cranes, and other construction equipment
  • Machinery: photocopiers, 3D printers
  • Inventory

This isn’t a comprehensive list by any means, but an example of items covered. And as we mentioned, there are events that your commercial property insurance will not protect against, so before you sit down with your agent, let’s talk about some additional coverage you might want to consider for more complete protection.

Commercial property insurance doesn’t cover these events

In South Florida, hurricanes and flooding are facts of life. While your commercial property insurance doesn’t cover either one, you can purchase coverage separately. For more comprehensive property protection, you really can’t afford to ignore these inevitable weather happenings. 

Hurricane insurance is available as a separate policy and covers hurricane-related wind damage. However, it does not cover flooding. Flooding often happens during a hurricane, but your hurricane policy is specific to hurricanes, and only covers the same types of damage as your commercial property insurance.

Flooding can also happen at other times, such as a heavy rainstorm. You can buy flood insurance from your agent, but all flood insurance is provided through the Federal Emergency Management Agency (FEMA). It covers damage to heating and plumbing, furnaces, water heaters, major and built-in appliances, and fuel tanks. Solar energy equipment along with permanently installed carpet, cabinets, bookcases, and paneling are also covered. Do you use a detached garage you use at your business location? That’s covered, too. It’s important to note, though, that a flood policy will only cover you if all damage happens as a direct result of flooding

Now that you know what’s covered and what’s not covered by commercial property insurance, your next question is likely, “How much does it cost?” The cost depends, of  course, on your deductible, but there are other factors. Let’s take a look. 

Commercial property insurance cost factors

There are always choices when buying insurance, but just like everything else in life there are trade-offs. The goal is to find the right balance. For example, higher deductibles mean a lower premium, but if you make that choice, it’s important you have the cash on hand to pay your part.

Another choice you have is the type of deductible. A percentage deductible means you pay a percentage of the value. Or you could select a flat deductible: You pay a flat rate no matter the loss. But deductibles are another thing you’ll need to consider is how you want your payment calculated when you file a claim.

There are two methods insurers use to calculate what they’ll pay for your losses. These are replacement cost (RC) and actual cash value (ACV):

  • ACV: When you suffer a loss, your insurer will look at the asset’s current market value. For example, if you suffer a break-in and computers and printers were stolen, your insurer will look at current values – what someone would pay for it now – no matter what you paid for it. Depreciation plays a big part in ACV. Choosing this type of reimbursement is your least expensive option.
  • RC: You will be paid the actual cost of replacing your property. That means that when it comes to those stolen computers and printers, you would receive enough money to buy brand-new equipment of equal quality, no matter the age of those stolen.

RC coverage premiums are more expensive, but if you suffer hurricane damage or flooding, ACV will probably not make your business whole. It’s important to protect mission-critical business assets, and your agent can both customize and optimize your policies to meet the unique needs of Florida businesses.

Now let’s talk about cost. Commercial property insurance costs depend on the value of your business property and your assets. If your business is small, you may pay only $500 annually. However, the average business policy costs about $742 per year, with most businesses paying about $1,000 to $3,000 per million dollars of coverage. Since a single incident of vandalism costs a business an average of $3,370, that’s quite a deal.

It’s obvious commercial property insurance is a must-have for every business owner. You never know what might happen, and you want to make sure your business continues to not only exist but thrive.

Avante can customize your commercial property insurance policy

Avante will work just as hard to build the complete coverage your business needs as you did to build your business. We’ll sit down and go over deductibles and coverage options and tailor policies that work for your unique business. Reach out today because life (and business) is unpredictable. At Avante, we’re always standing by.

This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.