Clarke & Sampson Blog

Coverage Insights: Commercial Property Insurance

Scott Jefferson | Wednesday, March 27, 2019

The Basics of Commercial Property Insurance

Your livelihood is dependent on the survival of your business, so it is important that you protect it against potential threats. For instance, a fire could destroy your business’s warehouse and the contents inside, or a burst frozen pipe could damage important documents and valuable papers. Worse, you could have trouble paying your employees during a loss because your funds are devoted to repairing damage.

If bearing the risk yourself is not an option, purchasing property insurance is often a simple solution. Understanding your needs should start with taking inventory of your business property and discussing options with a licensed insurance agent.

Types of Property You May Need to Insure:

Here are some examples of property that’s commonly insured:

- Buildings and other structures (leased or owned)
- Furniture, equipment and supplies
- Inventory
- Money and securities
- Records of accounts receivable
- Leasehold improvements and betterments you made to the rented premise
- Machinery/boiler
- Electronic data processing equipment (computers, etc.)
- Valued documents, books and papers
- Mobile property (construction tools, photography equipment, etc.)
- Property in transit
- Extra expenses as a result of loss

Types of Property Insurance Policies

Commonly used forms of property insurance include direct damage property insurance (what most people think of when they hear "property insurance"), time element coverages, builders risk, crime insurance, auto insurance, and inland marine insurance. For the purposes of this post, we're largely focused on direct damage property insurance.

Types of Property Insurance - Cause of Loss

The common causes of loss options are basic, broad, and special. When available, special form property insurance is preferred. It provides the broadest form of property insurance. It provides coverage for all causes of loss except for certain perils that are specifically excluded. Common examples of exclusions in the special form include war, nuclear hazard, and earth movement.

Actual Cash Value Vs. Replacement Cost

Property insurance has two common valuation techniques. The valuation technique specified by your policy could alter a claims payment by thousands of dollars, so be sure to review the details.

  • Replacement cost: The cost of a brand-new item to replace your stolen, damaged, or destroyed item. 
  • Actual cash value: The cost of a brand-new item, minus depreciation. In other words, the reimbursement will be the estimated value of your old, used item if you attempted to sell it on the market.

Most property insurance policies also include a coinsurance clause, which requires the policyholder to carry a limit of insurance equal to a specified percentage of the value of the property to receive full payment at the time of a loss. Should you decide to purchase inadequate coverage for your property, you may be obligated to pay a percentage of all losses.

Contact us today at (703) 683-6601 to learn more about our property insurance and loss control solutions to protect your business.