What Does Commercial Property Insurance Cover?

Commercial property insurance protects eligible buildings, equipment, inventory and other tangible property a business owns or is responsible for. It is different from general liability and does not automatically cover every interruption loss.

1. What Property Can Be Insured?

Buildings, renovations, furniture, computers, machinery, inventory, signs and tenant improvements may qualify. Covered locations, property classes and limits must be accurately listed.

2. What Causes of Loss Are Covered?

Fire, theft, wind, hail, explosion or accidental pipe breaks depend on the basic, broad or special form and exclusions. Special form does not cover every risk.

3. Replacement Cost and Actual Cash Value

Replacement cost generally repairs or replaces similar property without first deducting depreciation. Actual cash value generally deducts depreciation. Old roofs, machinery or inventory may have different valuation terms.

4. Coinsurance and Insurance to Value

A policy may require a limit equal to a percentage of property value. Underinsuring can trigger a coinsurance penalty and reduce payment even for a partial loss.

5. Deductibles

A deductible is the business's share of a covered loss. Wind, hail, flood or earthquake can have special deductibles or require separate coverage.

6. Business Income Requires Separate Review

Repair costs are different from income lost while operations are interrupted. Check business income, extra expense and contingent interruption coverage, waiting periods, restoration periods and limits.

7. Common Exclusions and Gaps

Flood, earthquake, wear, pests, equipment breakdown, cyber events, employee theft and utility interruption may be excluded or limited. Outdoor property, cash, records and goods in transit may have low limits.

8. Locations and Protection

Use, size, roof, electrical systems, sprinklers, alarms, vacancy, neighboring exposures and storage affect underwriting. Failure of required protective safeguards can affect claims.

9. Create an Inventory

Document buildings, improvements, equipment, seasonal inventory peaks, serial numbers, photos and purchase records at each location. Review lease responsibilities for glass, HVAC, improvements and insurance.

10. After a Loss

Protect people, call police or fire services as needed, prevent further loss, photograph and preserve damaged property, promptly report the claim and keep repair, cleanup, replacement and interruption records. Do not discard important evidence without checking.

This is general education, not legal, accounting, valuation or individual insurance advice. The policy, endorsements and applicable law control covered property, valuation, exclusions and payment.