Commercial property insurance protects business owners against the risks of renting/leasing or owning a storefront, office, or other business property.
A commercial property policy helps pay to replace or repair damaged, lost, or stolen business property and protects a business’s physical location and commercial assets, such as inventory and equipment.
While commercial property insurance is not always a requirement, it is important to carry this coverage. Many landlords require tenants to obtain commercial property insurance when renting/leasing a commercial space.
Business owners purchasing commercial property may also be required to carry this insurance as part of their loan terms.
However, any business that owns or rents/leases commercial space owns or rents/leases costly tools or equipment, or has inventory or products should consider getting commercial property insurance.
What Claims are Covered by Commercial Property Insurance?
Commercial property insurance is designed to cover a wide range of common losses suffered by business owners. Most standard commercial property insurance policies will provide coverage after businesses suffer physical damage due to fire, water damage, lightning strikes, severe weather, hurricane damage, theft, or vandalism.
Proper insurance coverage can help protect a business’s physical assets, such as the building itself, tennants, improvements and betterments, tools, equipment, furniture, inventory, and personal property.
What Claims are Not Covered by Commercial Property Insurance?
While commercial property insurance provides comprehensive property coverage for businesses, most policies have a list of exclusions.
An exclusion is a provision within an insurance policy that denies coverage for specific events, acts, types of damage, properties, or locations. The policy does not cover excluded items, and they do not count toward the policy’s total out-of-pocket maximum.
Some claims not covered by commercial property insurance include:
1. Commercial Auto Damage
While commercial property insurance covers damage or loss to a building and its assets, it does not usually cover company-owned or rented/leased vehicles. Instead, business owners who use cars, vans, trucks, or other vehicles for business purposes should obtain commercial auto insurance.
2. Flood Damage
It is easy to be confused about flood damage coverage in commercial property insurance. Most policies do cover water damage, such as a leak or burst pipe. However, they do not cover water damage due to flooding. Business owners who require protection from flood loss should purchase a separate flood insurance policy.
3. Business Interruption
There may be instances when a business is forced to close temporarily, such as after a fire or storm damage. While most commercial property insurance policies do not include business interruption coverage, business owners can protect against this risk with a separate business interruption policy.
4. Damage from Inadequate Maintenance
Commercial building owners are responsible for maintaining their property and making essential repairs when needed. If a property owner fails to make important repairs, such as removing mold, addressing termite damage, or replacing areas that have succumbed to rot, they may be held liable for the cost of damages.
5. Earthquake Damage
Commercial property insurance does not generally cover property damage caused by earth movement events, such as mudflows, sinkholes, or earthquakes. Businesses at risk for these events should obtain earth movement or earthquake insurance.
6. Intentional Property Damage
There may be instances when commercial property damage is done intentionally. For example, when a disgruntled employee breaks an office window or damages a piece of company equipment. Intentional property damage to a business is not covered by commercial property insurance.
7. Hail and Wind Damage
Businesses in certain areas across the U.S., such as those on the Gulf Coast, are at a higher risk for wind damage. Due to this increased risk, commercial property insurance does not generally cover this type of peril. Instead, business owners must protect their investments with a separate windstorm insurance policy.
8. Liability Claims
There is always a risk that an employee or business owner could make a costly mistake. The financial repercussions could be significant if a company error causes an angry customer to take legal action against the business.
Unfortunately, most commercial property insurance policies do not cover liability claims. A separate liability policy is essential to protect business owners from financial losses due to a mistake.
Contact Atlas Insurance Agency for an Insurance Quote
Owning any business is a significant risk that requires owners to be protected against financial losses. Commercial property insurance is a wise investment that can help companies save significantly by covering unexpected events and perils.
However, there are some types of claims not covered by most commercial property insurance policies. To learn more about what commercial property insurance covers, contact us at (808) 400-6634 or request an insurance quote online.