Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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commercial property insurance

Commercial property insurance, also known as business property insurance, offers protection against accidents, damages due to fire, theft, storms or some other event that may be outlined in the policy.

The policy covers the cost of replacement or repairs of the property, inventory or assets and in some cases, it may even compensate for things that cannot be replaced.

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Many times businesses buy commercial property insurance as a part of their business owner’s policy. This allows companies to combine two of the most important types of policies for businesses to be combined in a single package that is usually cheaper than buying them separately.

Who Should Purchase Commercial Property Insurance?

Commercial property insurance can be purchased whether a business owns, rents or leases a building. In cases where a building is leased or rented, the building owner’s policy will most probably not cover the goods or machinery that is inside the building.

The business owner will have to take care of that themselves so that any on-premises furniture, merchandise, and machinery is covered. The cost of this type of tenant coverage is normally considerably less as opposed to if the building and the goods had to be covered.

Businesses that are operating at a number of different locations can be covered in a single policy, unless, of course, they have different functions and risk profiles. This issue could arise if, for example, the administrative office is located in a different place than the factory where production takes place.

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Types of Commercial Property Policies

Tornado damage

There are various types of commercial property policies and they cover different risks or perils. Some policies will only cover the perils explicitly stated in the policy, while other policies will cover all risks except thosepurposely excluded. Depending on the location of the business, the business owner many have to buy extra coverage.

For example, if a business is located in a tornado-prone area and the commercial property policy the owner has excludes damage due to tornados, then the business owner will have to buy it as an additional coverage.

Where to Get the Best Price on Commercial Property Insurance

The type of coverage one gets depends on the amount of coverage desired and what they can afford. Once the type of coverage required has been decided, it is generally a good idea to shop around and get quotes from several different companies before signing up with any one. It is quite common for different insurers to give different quotes for exactly the same policy, so shopping around is essential to make sure one gets the lowest possible quote.

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Kinds of Commercial Property Policies

Generally, commercial property policies fall into one of these three basic categories:

  1. Basic form policies simply cover the common risks like damage resulting from a fire, lightning, windstorm, vehicle, aircraft or civil disruption.
  2. Broad form policies normally provide the basic coverage along with coverage for any added risks. This would include things like water damage, structural collapse, loss due to ice, sleet or weight from snow.
  3. Special form policies offer the most complete coverage, as they cover everything except that which is specifically excluded. Such policies normally exclude loss due to floods, movement of the earth, damage incurred as a result of a nuclear disaster or terrorism, general wear and tear, etc.

Commercial property policies give the option of either having replacement cost coverage, actual cash value coverage or use a combination. Replacement cost coverage pays for the replacement of the lost property with new property of similar quality and type up to the dollar value of the policy. The actual cash value policy pays for the replacement minus the depreciation. Replacement cost coverage policies tend to be more expensive than actual cash value policies.

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Choosing an Insurance Company

Choosing an insurance company is as crucial as choosing an insurance plan to the well being of a business. The best way to start is to research a company online and read what their customers have to say about them. Comparing the comments of different companies is a good measure of how good the company is where it really counts – paying a claim. There are a number of things that should be considered when choosing an insurer.

  • Price – The cost of a policy can differ greatly from one insurer to the next without any significant change in policies. That is why it is important to compare quotes from several different companies.
  • Stability – It is not uncommon for insurance companies to fail and that can be a major setback for a business. Different services like A.M. Best or Standard & Poors rate insurers according to their stability. Never consider buying insurance from a company with a rating below B+. It may just be that by the time one really needs them to pay a claim, they may already have packed up and left.
  • Service – Obviously, one wants a company that provides service when it is needed. If they make promises but don’t deliver, then it is pointless to insure with them.

It is better to have a company that is not only registered in the state in which the business is situated, but has a physical presence there. Many companies will sell policies through other companies’ it is better to avoid these and stick to one that is physically present in the state. Searching the state insurance department website will help one to figure if an insurance company is registered in the state.

What Kind of Insurance Companies to Avoid

Some insurance companies will knowingly get into the market for a short time only – just to determine its profitability and leave thereafter if it is not to their liking. Upon exit they leave their customers high and dry. These floater companies offer a “deal” simply because they are new to the market and they need to lure customers away from their existing insurers. It is wise to avoid these deals and go with a reputable company. While on the face of it, these deals may be very attractive, in the long run they could turn out to be very expensive. Compare quotes from companies that have been in the market for at least ten years.

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