Tips for finding affordable commercial property insurance

Insureon Staff.
By Insureon Staff
April 1, 2014
Find out when you need commercial property insurance, along with ways to reduce the cost.
Man in work environment working on laptop.

Commercial property insurance is one of the building blocks of your business protection plan. That's especially true if you work in an industry that has specialty equipment, product inventory, or costly items such as computers or other electronics.

If you own your commercial space, you have even more incentive to protect your investment with adequate coverage.

But how do you go about finding a business property policy that fits your needs and your budget? Here are some tips for finding an affordable plan.

When do I need commercial property insurance?

Some small business owners may think their other policies cover their business essentials. But they often don't realize how limited landlord’s insurance, renter’s insurance, and homeowner’s insurance coverage can be when it comes to business protection.

For instance, if you rent commercial property from a landlord, don’t assume that your landlord’s insurance covers your equipment, furnishings, or products. This policy only covers the rental property and certain structures, such as a deck, garage, or shed. That means all your commercial gear is still exposed if you don’t have your own coverage for the building’s contents.

Unfortunately, renter’s insurance and homeowner’s insurance can’t fill this gap, either. These only cover personal property, and both typically have exclusions for items used for business.

If you run a home-based business, it's even more important to be aware of these exclusions for business property. Unless you've purchased appropriate riders to your homeowner’s policy, you could leave yourself exposed to potential losses.

To fill these coverage gaps and make sure your business is protected, you need commercial property insurance.

A commercial property policy not only covers items such as your computers, supplies, and inventory, it also protects any property owned by your business from damage and loss. If a covered event occurs, you’ll have the funds to repair your building and replace your business property.

Covered commercial property insurance claims

Common property claims involve loss or damage caused by:

  • Theft or vandalism
  • Lightning
  • Fire
  • Windstorms
  • Power surges or outages

Let's say a fire breaks out in your office building, due to an old toaster in the break room. Depending on your policy’s limits, property insurance can pay for:

  • Repairs to your building (drywall or roof repair)
  • Replacing your scorched equipment (refrigerators, computers, copiers, printers, etc.)
  • Replacing furnishings and fixtures (such as carpets and lighting)
  • Replacing your inventory (products you sell)

Understand the difference between replacement value and actual cash value coverage

You can usually choose to insure your property at its replacement value or its actual cash value. The option you choose will affect how much you pay for property insurance. Here’s what you need to know to make an informed decision:

Replacement value benefits

If you choose a policy with replacement value coverage, your provider will compensate you with enough money to replace your insured property with brand-new items in the event of a covered property claim. Because you receive enough compensation to buy new items, this option typically comes with a higher premium. However, it’s an option that’s worth exploring if:

  • You have hard-to-replace, specialty, or expensive equipment.
  • You have a lot of high-tech gear (as these items depreciate quickly).
  • You have inventory you need to protect.
  • You want to replace your damaged items quickly.

Replacement value coverage will pay with “like kind or quality” up to the stated limit in your policy. So if, for example, your office building had carpeting, the policy isn’t going to replace the damaged carpet with imported Italian tile.

Actual cash value benefits

Actual cash value coverage can cost significantly less than replacement value coverage.

If you choose a policy with actual cash value coverage, you’ll receive compensation that equals the depreciated value of the damaged asset. (Depreciation is the loss in value of the property due to wear and tear over time.)

If you can easily find used replacements for your business items, you may want to choose this coverage so you can reduce your premium costs.

Know how valuable your items really are

One way to save money on property insurance is by choosing policy limits that match the value of your owned property. That means you'll want to know exactly how much your property is worth.

Keep in mind that some items are more valuable than their purchase cost.

Say a thief steals your company laptop. At first, it seems like replacement is straightforward. But what if you found out the ordeal could potentially bankrupt your business – especially if you have sensitive information housed on your stolen device?

These costs aren’t about the replacement value of the device. Rather, they are a reflection of the loss of the information contained on them. It’s all the more reason to make sure your property is adequately protected.

Reduce your insurance rates by managing risks

Another way to save money on your property policy is to implement a solid risk management strategy. Some insurance providers offer discounts if you try to reduce your risk exposures.

Some cost-saving preventative measures may include:

  • Setting up burglar systems and security cameras in your building.
  • Installing deadbolt locks and shatterproof glass.
  • Installing smoke detectors and sprinkler systems.
  • Updating your electrical systems to reduce the risks of fire damage.

Combine property insurance with general liability insurance for a discount

Finally, you can also save money on your business’s property insurance by purchasing a business owner’s policy (BOP). This plan bundles property insurance and general liability insurance together for less than you’d pay for each policy individually.

Most small, low-risk businesses are eligible for a BOP. It's highly recommended for small companies that own property and want protection against the most common risks of interacting with clients and customers.

Compare quotes from trusted carriers with Insureon

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