What commercial property insurance is and why it's important

Your business has a lot of physical assets. Your building and its contents. Any outdoor fixtures like signs or fences. Stuff that can be damaged – which means you need to protect it. That’s why commercial property insurance (also referred to as business property insurance) is a smart investment to make for your business.

While unexpected accidents or events can happen anytime – storms, fires or other major setbacks – with business property insurance, you’ve got support and financial assistance to help you recover quickly.

How commercial property coverage works

Commercial property insurance coverage varies, but they’re generally classified by the type of event leading to a loss, and by what things are insured.

Basic property insurance usually covers losses caused by fires or explosions, theft, vandalism and damage from vehicles or airplanes. Additional coverage referred to as “endorsements” can be added to provide additional protection for things such as earthquakes and broken glass.

The key items insured in business property insurance include your building, office equipment, inventory and outdoor items on the premises.

Taking inventory

Before you meet with an agent, you should take an inventory of your business. This helps you determine what property you want to insure, what its replacement value would be and if it’s worth insuring.

The property you might insure could include:

• The building that houses your business (If you lease or rent your space and are obligated to insure the building you occupy, there's coverage for you too) 
• All office equipment, including computers, phone systems and furniture, whether they’re owned or leased
• Accounting records and important company documents
• Manufacturing or processing equipment
• Inventory kept in stock
• Fence and landscaping
• Signs and satellite dishes

How do you want things covered?

Commercial property insurance plans pay for losses based on the replacement cost of the item or its actual cash value.

• Replacement cost (RC) is the amount necessary to repair, replace or rebuild property on the same premises, with comparable materials and quality, without deducting any amount for depreciation.
• Actual cash value (ACV) is the cost to replace it with new property of similar style and quality, minus depreciation.

Typically, premiums for policies covering property insured on an ACV basis are lower because the limits only include the depreciated value. This amount might not be enough if you elect to insure the property on a RC basis. Your insurance agent can work with you to make sure you have your property adequately insured.