Commercial Property Insurance made simple

Learn everything about commercial property insurance.

Commercial Property Insurance

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Commercial Property Insurance

Commercial property insurance helps business owners rest assured that the insurance company will cover any unexpected damage to their business’ physical assets. Some businesses have crumbled in the past due to unforeseen events such as building collapses, fire outbreaks, floods, etc.

Commercial property insurance companies are saddled with the responsibility of covering damages to the properties owned by a business.

This damage could be in the form of a fire outbreak, building collapse, destruction of equipment, etc. Many businesses find it difficult to get back on their feet after suffering damages without insurance coverage.

According to a report in 2018, about 25% of businesses do not reopen after a disaster. Thankfully, some business owners who have their commercial properties insured can get back on their feet. In this piece, you’d learn about commercial building insurance, its types, who it’s meant for, what it covers, and more.

Commercial Property Insurance Explained

Other names for this include; business hazard insurance or business property insurance. It covers the entire property that you use in running your business. However, different policies for commercial property insurance exist, and they do not cover specific items. Rather, they cover categories of property.

An example is the Business Owner’s Policy (BOP) which is designed for small businesses with low-risk exposure, e.g., restaurants. The policy covers both commercial properties and general liability. That is, it will cover bodily damage to your business building and protect you from customers’ claims. 

However, the coverage for the damages to business buildings depends on the type of policy you buy. This could be a named peril or an all-risk coverage.

The former covers property damage caused by a stated peril, e.g., fire, vandalism, vehicle collision, etcetera. Therefore, any damage to the business building resulting from an incident outside the stated peril won’t be covered.

Another thing to take into consideration is your definition of a building. Yours might be a bit different from that of your insurance provider.

How Commercial Property Insurance Works

Most policies of business property insurance are aimed at covering properties that are located at your business premises. So, if you have off-site locations, you’d likely get zero coverage for any damages that occur there. However, you can buy separate policies to cover properties outside your business location.

Let’s say you own a retail store. With commercial building insurance, if there was a fire or theft, and you lost valuable items or experienced damage to your building, the insurance would help cover the costs of repairing or replacing those things.

Usually, both the building’s physical structure and its contents are covered by the insurance policy. These might be furniture, equipment, and inventory. The policy can also provide liability protection when someone is injured on the property.

The cost of the insurance will depend on factors such as the property value, the location, and the type of business. Having the right amount of coverage is important, as being underinsured can leave a business vulnerable to financial losses.

commercial property insurance

Who Needs Commercial Property Insurance?

This type of insurance is for any business owner who owns or leases commercial property and wants to protect their assets and investments. It could be a retail store, office building, warehouse, or restaurant. So, if there was a fire or theft, business property insurance would help cover repairing or replacing damages. 

Even if you lease your commercial space, you may still need commercial building insurance. Landlords usually only insure the physical structure of a building. So, business owners need to protect their assets and investments with insurance policies.

Types of Commercial Building Insurance Coverage

Commercial building insurance can be broken down into several types of coverage. They are as follows:

Building Coverage

This type of commercial building insurance protects the physical structure of the building. It includes the walls, roof, and any permanent fixtures. Let’s say a fire occurred accidentally in the building and caused destruction to the building. The loss would be paid for by the insurance company.

Business Personal Property Coverage

This type protects the building’s interior items, including inventory, furniture, and equipment. So, if damages occur on any of these, The insurance provider would pay for it.

Business Interruption Insurance 

Here is how this works. If the business is unable to operate as a result of a covered incident, it helps compensate the income loss. Some of these events can be fires or natural disasters.

Equipment Breakdown Coverage

This protects against sudden and unexpected equipment breakdowns, such as boilers, air conditioning systems, and elevators. When a piece of equipment breaks down unexpectedly, it can slow workflow and lead to loss.

Also, fixing it immediately might be capital-demanding. However, the business survives scenarios like this when there is insurance coverage for equipment.

Liability Insurance

It protects against claims of injury or damage caused by the business on the property.

Flood Insurance

This policy provides separate coverage specifically for damage caused by flooding. This is because a conventional commercial building insurance policy does not cover damage brought on by floods.

Cyber Liability Insurance

This policy protects against losses due to a cyber attack, such as data breaches or computer fraud.

commercial property insurance

What Is Covered Under Commercial Property Insurance Policies?

This insurance typically covers the following:

  • The building’s external framework, including walls, roof, and permanent fixtures.
  • The things inside the building, like furniture, tools, and stock.
  • loss of income in the event that a covered event, such as a fire or a natural disaster, prevents the business from operating.
  • Sudden and unexpected equipment breakdowns, such as, air conditioning systems, elevators and boilers.
  • Claims of injury or damage caused by the business on the property.
  • Typically, a conventional commercial building insurance policy does not cover damage brought on by floods.
  • losses brought on by cyberattacks, such as identity theft or data leaks.

However, it’s critical to recognize that these coverage types may vary depending on the policy. Also, some insurance providers may offer additional types of coverage.

What Is Not Covered Under Commercial Property Insurance Policies?

As explained earlier, Business property insurance is a sort of coverage that offers owners of businesses financial security. This includes damage or loss to their commercial property. However, it’s crucial to realize that not everything is covered under this insurance.

Here are a few common exclusions from commercial building insurance:

  • Natural disasters: Some natural disasters, such as earthquakes or hurricanes, may not be covered under a standard commercial property insurance policy. You might need to get a different policy or endorsement to cover these events.
  • Floods: Typically, a conventional commercial building insurance policy does not cover damage brought on by floods.

How Much Does Commercial Property Insurance Cost?

You might be wondering, just how much will it cost? You are not alone. Let’s say you’re the owner of a growing business, and as you expand, you start to think about all the ways you can protect your assets. Commercial building insurance is among the most significant financial commitments you may make. 

The price of commercial property insurance can differ significantly depending on a number of criteria. For example, your property’s location, size, kind, and amount of required coverage are all determining factors.

But on average, you can expect to pay anywhere between a few hundred and a few thousand dollars yearly for commercial property insurance.

It’s always a nice idea to compare prices and get quotes from multiple insurance providers. This ensures that you receive the best protection for the lowest possible price.

Also, remember that having commercial property insurance can ease your mind. You’re certain that your assets are protected in case of unexpected events like theft, damage, or natural disasters.

How To Calculate the Premium for Commercial Property Insurance?

The premium for business property insurance is calculated based on several factors. These include; 

  • Property location
  • the value of the property
  • type of property use
  • amount of coverage desired. 

The insurance company may also consider factors such as the construction type and materials used. Also, they might consider the building’s state and the degree of risk involved.

In general, the premium is determined by multiplying the amount of coverage requested by a rate that reflects the level of risk. This rate is based on the type of property, its location, and the level of exposure to potential loss or damage.

It’s important to accurately assess the value of the property and the amount of coverage needed. This is to avoid paying too much or too little for insurance. The insurance company may require an appraisal of the property to determine its value. Also, they might inspect the property to assess its condition and identify potential risks.

Once the insurance company has the necessary information, it will calculate the premium and provide a quote. The policyholder can then compare quotes from multiple insurance providers. Afterward, they’d find the best coverage and cost for their needs.

commercial property insurance

What Is the Best Commercial Property Insurance Company?

In Canada, some of the best commercial property insurance companies are:

Foxquilt

Foxquilt is an insurance company that uses its technology to help business owners in some parts of Canada and North America. Among the insurance services they offer to businesses is commercial building insurance.

You can save more dollars and get your business property insured without spending much time in the waiting period. Some business owners claim that they finalized their deals with the broker on Foxquilt in less than two days. 

Apollo

Apollo is another great insurance company. Some of the insurance services they offer are business property insurance, liability insurance, wedding insurance, and more.

All application processes on Apollo can be completed online. While many insurance companies might take forever to insure your business, it takes less than ten minutes with Apollo.

Intact Insurance

This insurance company is accessible to Canadians. They offer a variety of insurance which includes business property insurance. However, if you want to cut costs, this company might not be your choice. This is because their fees are quite high.

Aviva Canada

Aviva Canada is another insurance company that Canadians can rely upon. They offer several insurance services, which include commercial building insurance.

So, this might be for you if you are a business owner in Canada. However, there are complaints about poor customer service response and difficulty reaching an agent.

These companies have a good reputation for providing quality commercial property insurance coverage and excellent customer service.

How to Get Cheaper Commercial Property Insurance 

There are several ways to potentially lower the cost of commercial property insurance, including:

Increasing Your Deductible

Raising your deductible is one of the simplest ways to lower your premium. By assuming a higher level of risk, you can reduce the amount you pay for insurance coverage.

Bundling Policies

If you have multiple insurance policies for your business, such as liability insurance, workers’ compensation insurance, etcetera, consider bundling them together with one insurer. This can often lead to discounts and more favourable rates.

Improving Property Security

Installing security systems, such as alarms and cameras, can reduce the risk of loss or damage to your property. This may result in lower insurance premiums.

Regularly Reviewing Your Coverage

Regularly reviewing your coverage to ensure you have the right amount and type of insurance can also help you avoid overpaying for insurance.

Shopping Around

Comparing quotes from multiple insurance providers is an effective way to find the best coverage and cost for your needs.

By taking these steps, you may be able to find an insurance policy that meets your coverage needs at a lower cost. Working with an insurance professional to review your options is always a good idea. They’d make sure you have the right coverage in place.

Deductibles in Commercial Property Insurance Policy

Deductibles are an important aspect of commercial property insurance. In short, a deductible is an amount you agree to pay out of pocket before your insurance kicks in.

For example, if your policy has a $1,000 deductible and you file a claim for $10,000, you’ll pay the first $1,000, and your insurance will cover the remaining $9,000. The idea behind having a deductible is to encourage policyholders to be more cautious and take steps to avoid filing claims.

Having a higher deductible can lower your premium, as it shifts more of the risk to you. But remember that you’ll have to pay more out of pocket if you file a claim. On the other hand, having a lower deductible can result in a higher premium, but you’ll have less to pay if you file a claim.

It’s important to carefully consider your deductible and balance the cost of the premium with the amount you’d be willing to pay out of pocket in case of a claim. It’s always a good idea to work with an insurance professional to find the right deductible for your needs and budget.

Commercial property insurance conclusion

Every business owner needs their property insured to cover unexpected damages.

To get the best coverage and cost, shopping around and comparing quotes from multiple insurance providers is important. You can also potentially lower the cost of commercial property insurance by increasing your deductible, bundling policies, and more.

However, It’s important to find the right balance between your deductible and premium and work with an insurance professional. This is to ensure that you have the right coverage in place.

Other types of insurance

Business Insurance in AlbertaBusiness Insurance in ManitobaBusiness Insurance in British ColumbiaBusiness Insurance in New Brunswick
Business Insurance in Nova ScotiaBusiness Insurance in Newfoundland and LabradorBusiness Insurance in OntarioBusiness Insurance in Prince Edward Island
Business Insurance in QuebecBusiness Insurance in Saskatchewan

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FAQs about commercial property insurance

What is commercial property insurance?

Commercial property insurance is a type of insurance that protects businesses and their property against losses or damages. These damages might be caused by fire, theft, or natural disasters. The insurance covers buildings, structures, and other physical assets like equipment and inventory.

Is commercial property insurance required by law in Canada?

In Canada, business insurance is not made compulsory. However, business vehicle insurance is mandated. So, getting property insurance for your business is a personal choice as a Canadian resident. Although, it is the best thing for your business.

Are vacant properties covered by commercial property insurance?

Some insurance companies exclude coverage for properties that go vacant for a specific number of days. Some policies wouldn't cover damages on properties that are not occupied for two consecutive months. This is because an unoccupied building becomes a free space for anyone.

What are the basic principles of property insurance?

Property insurance has the following basic principles:

  • Utmost good faith.
  • Insurable interest
  • Indemnity.
  • Contribution.
  • Proximate.
  • Loss minimization.
  • Subrogation.
They are otherwise known as the seven basic principles of property insurance.

What exclusion should you watch for in commercial property insurance?

Exclusions are those causes of damages to your commercial properties that are not covered by your insurance policy. The common exclusions to watch out for are; perils, hazards or natural disasters, etcetera. Understanding these exclusions would guide your choice of policy.

What are the limits on commercial policy?

Limits on commercial policy depend on the financial capacity of the business and the risk it incurs. The average range of limits is between $300,000 to $1,000,000 for each occurrence. However, the major types of limits on commercial policy are:

  • Per-occurrence limit.
  • Per-person limit.
  • Combine limit.
  • Split limit.
  • Aggregate limit.
  • Special limit.

Is there a difference between all-risk and named peril insurance coverage?

Yes, there is a difference. An all-risk coverage would cover any type of damage to your business property. However, a named peril coverage covers damages resulting from any of the stated peril in the agreement. This could be fire, theft, vandalism, etcetera.

What happens if your insurance company folds up?

This is one scenario that scares some business owners. However, some laws ensure that business owners get insurance even if their insurance company liquidates. The state guarantees association and guarantees funds transfer the insurance's policies to another company.

Commercial Property Insurance made simple

Learn everything about commercial property insurance.

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