What is commercial property insurance?
Commercial property insurance, commonly referred to as business property insurance or commercial real estate insurance, offers coverage for your company’s physical assets, including its contents and outdoor fixtures, such as signs and fencing. If your commercial property sustains damage or destruction due to a covered loss, this type of insurance can help cover repair or replacement costs.
Commercial property insurance protects your business’s physical assets against events like fire, theft, vandalism, storms, and pipe bursts. However, it usually excludes events such as earthquakes and certain types of weather damage unless they’re included in the policy. It’s crucial to consult your insurance advisor to understand the scope of coverage provided by your policy and ensure it meets your needs.
Several professions and industries, including but not limited to the following, should purchase commercial property insurance:
- Furniture stores
- Pet stores
- Book stores
- Gift shops
- Home builders
- Graphic designers
- Clothing stores
What does commercial property insurance cover?
Commercial property insurance covers numerous physical assets that are critical to business operations, such as:
- Important documents
- Equipment and tools used in the business
- Computers Furniture Others’ property
- Your premises (buildings)
- Inventory and Exterior signs
- Fence and landscaping
What coverages are excluded from commercial property insurance?
While the specific exclusions may vary depending on the policy, commercial property insurance typically does not cover the following:
- Floods and earthquakes
- General wear and tear
- Intentional damage
- Acts of war and terrorism
- Pollution damage
- Business interruption due to utility failure
- Cybersecurity incidents
Luckily, several additional coverage options are available to fill gaps in coverage for excluded events. Contact BrokerLink today to help you review your policy terms and conditions, understand what is excluded, and ensure that your coverage meets the business’s needs.
Types of commercial property insurance
There are two types of commercial property insurance: replacement cost and actual cash value. The difference between them relates to how an insurance company reimburses policyholders for lost or damaged property.
Replacement cost refers to the amount of money it would take to replace the lost or damaged item with a brand-new one of similar quality and functionality at current market prices. This coverage typically pays out more than the item's actual cash value, as it doesn’t account for depreciation.
On the other hand, actual cash value takes into account depreciation and the item’s age and condition at the time of loss or damage. The insurance company pays out the item’s value at the time of loss, which may be less than its original cost due to depreciation.
For example, if a five-year-old laptop is damaged beyond repair, the replacement cost coverage would provide enough funds to buy a new laptop with similar features. In contrast, the actual cash value coverage would factor in the age and condition of the laptop and offer a lower payout that accounts for depreciation.
It’s important to note that replacement cost coverage generally costs more than actual cash value coverage, as it provides more comprehensive protection for policyholders.
Why businesses need commercial property insurance
Despite some business insurance myths floating around, businesses need commercial property insurance. It protects their physical assets, such as buildings, equipment, inventory, and other property, against damage or loss due to unforeseen events such as fires, theft, vandalism, or natural disasters. Without this insurance, businesses may have to bear the financial burden of repairing or replacing damaged property, which could be costly and disrupt their operations.
Commercial property insurance can also provide liability coverage for accidents or injuries that occur on the business’s property, protecting the business from potential lawsuits and financial losses. Additionally, some lenders may require businesses to have commercial property insurance to qualify for a loan, making it an essential part of securing funding for a business.
Overall, commercial property insurance is critical to ensure that businesses can operate smoothly and recover from unexpected events that could cause significant financial harm.
Benefits of commercial real estate insurance
BrokerLink understands that every business has unique requirements, so we offer customized commercial property insurance solutions to cater to your specific needs. It’s crucial to ensure that your business has appropriate coverage, which may include the following:
Commercial property insurance can protect a business’s physical assets, including buildings, equipment, inventory, and other property, against damage or destruction due to various risks, such as fire, theft, or vandalism.
Business interruption coverage
In the event of a covered loss, commercial property insurance can help cover the costs of repairing or replacing damaged property, allowing the business to continue operations without significant disruption. It can also help reduce the impact of income loss and have the means to cover necessary expenses such as payroll, bills, and other costs should your business have to shut down temporarily.
Business owners can choose from various types of coverage and limits to tailor their insurance policies to their unique business needs. One example is liability coverage for accidents or injuries that occur on the business’s property, protecting the business from potential lawsuits and financial losses. Those with increased risk of losses can opt for a higher level of coverage if necessary.
Peace of mind
In many cases, natural disasters can cause severe property damage that is beyond our control. Commercial property insurance policies can cover unexpected events such as fire damage, damage caused by winter storms, hail damage, and some types of water damage resulting from these disasters. With commercial property insurance, business owners can have peace of mind knowing that their property and business are protected against unexpected losses that could cause financial harm.
Additional coverage options to consider
Extending your commercial property insurance coverage can offer more extensive protection against customer claims related to your products or services even after the sale, such as reimbursement for legal expenses and defence costs. Below are some additional coverages that commercial real estate owners should strongly consider adding:
Commercial general liability insurance
This is a type of insurance policy that provides coverage for businesses against liability claims for bodily injury or property damage caused to a third party. The policy typically covers the cost of legal fees, settlements, and judgments that arise from covered claims. Liability insurance can also cover claims related to advertising injuries, such as copyright infringement or libel.
The policy is designed to protect businesses from various risks that could lead to costly legal battles and financial losses. Most businesses, regardless of size or industry, can benefit from having liability insurance in place to protect against unforeseen events that could impact their bottom line.
Professional liability insurance
Professional liability insurance, also known as errors and omissions (E&O) insurance, protects professionals from lawsuits resulting from their professional services. This policy is designed to cover legal costs and damages associated with claims of negligence, errors, or omissions by clients or third parties. This type of insurance policy can help mitigate the financial consequences of a lawsuit and protect the reputation of the professional or business. It is essential to carefully review your policy to ensure it covers all the risks associated with the professional services provided.
Equipment breakdown insurance
This type of insurance policy provides coverage for damage or loss caused by a mechanical or electrical breakdown of equipment used in a business’s operations. This policy typically covers the cost of repairing or replacing damaged equipment and any business interruption losses resulting from the equipment breakdown.
The equipment covered by the policy may include electrical systems, heating and cooling systems, computers, production machinery, and other equipment that is vital to the business’s operations. Equipment breakdown insurance can be beneficial for businesses of all sizes and industries, as it can help minimize the financial impact of unexpected equipment failures that could lead to costly repairs, replacement, or business interruption.
This insurance is a type of insurance policy designed to protect businesses and individuals from the risks associated with internet-based activities and digital data. It covers losses resulting from cyber attacks, data breaches, and other cyber-related incidents. Cyber insurance policies typically cover various expenses associated with a cyber incident, such as legal fees, notification costs, credit monitoring services, public relations, and business interruption losses. They may also cover liabilities arising from third-party claims of damage or loss caused by the cyber-incident.
Cyber insurance is particularly important for businesses that store sensitive customer information or handle online transactions, as they are at higher risk of cyber-attacks. Cyber insurance policies vary in coverage and may be tailored to meet an individual's or business's specific needs.
Home-based business coverage
Home-based business coverage is a type of insurance policy designed to protect businesses operated from home residences. This policy can cover property damage or loss and liability claims resulting from business activities conducted in the home. It typically covers equipment, inventory, and supplies used in the business and business interruption losses resulting from covered events.
Home-based business coverage can also provide liability coverage for accidents or injuries that occur on the business premises, such as a customer or client getting injured while visiting the home. This policy is vital for entrepreneurs and small business owners who operate their businesses from home as it can help minimize the financial impact of unexpected events and ensure that their business is adequately protected.
Commercial auto insurance
This type of insurance policy is designed to protect businesses from financial losses arising from accidents involving company-owned or leased vehicles. This policy typically covers damage to the vehicle, bodily injury to others, and property damage caused by the vehicle. Commercial auto insurance is essential for businesses that rely on vehicles for their operations, such as delivery companies, contractors, and commercial trucking companies. Still, it can also benefit businesses requiring their employees to drive to various locations or client homes.
This policy can also cover non-owned vehicles used for business purposes, such as employees’ personal vehicles used for business errands. The coverage and limits of a commercial auto insurance policy may vary depending on the type of vehicle, the business’s operations, and the level of risk associated with the business’s activities.
Factors affecting your commercial property insurance premiums
Several factors can affect your commercial property insurance premium. However, these factors may vary depending on the insurance company and the specific policy’s terms and conditions. Here are some factors that may affect your premiums:
Property value and type
The value and type of property being insured can significantly impact the premium rates. A higher-valued property or one with a unique design or high-risk features may lead to higher premiums. Therefore, the cost of replacing your commercial property and its contents is crucial in determining the necessary coverage and the corresponding premium cost.
Insuring an older building in case of a loss may be more costly than a newer building. In case of renovations or improvements, informing the insurer is crucial, especially for businesses situated in older buildings. Such changes may affect the insurance coverage and premiums. Typically, it is less expensive to insure newer buildings than older ones as the materials are newer and up to date, therefore less likely to cause an event that leads to a loss or claim.
Location and risk factors
The location of the property and the risks associated with the area, such as the likelihood of natural disasters, crime rates, and the local building codes, can affect the premium rates. Plus, your business’s location may require you to have specific or varying levels of coverage. For instance, if your business is located in an area prone to forest fires, you may need customized coverage with appropriate premiums to cater to such risks. The same goes for flooding, if you are close to a body of water it is important to obtain flood or sewer back up coverage.
The nature of the business operations conducted on the property can also impact the premium rates. For example, the premium rates may be higher if the property is used for high-risk activities, such as manufacturing or hazardous material storage. The potential for damage or loss resulting from accidents or spills is more significant in these industries, increasing the likelihood of a claim being made against the insurance policy.
The business’s claims history can also affect the premium rates. If the business has a history of making claims or has had significant losses in the past, the insurance company may charge higher premiums.
Safety and security measures
The safety and security measures in place on the property, such as fire alarms, sprinkler systems, and security cameras, can help reduce the risk of property damage or loss and may result in lower premiums.
It’s essential to discuss these with your insurance provider to understand how they impact your premium rates and ensure that your policy provides adequate coverage for your business’s needs. Contact BrokerLink today to learn more about what factors are affecting your premiums.
Ways to lower your commercial property insurance cost
Below you’ll find a list of ways to potentially lower your commercial property insurance premiums:
Increase your deductible
Increasing the deductible, or the amount the policyholder pays out of pocket before the insurance coverage kicks in, can lower the premium.
Install safety and security measures
Implementing safety and security measures, such as installing smoke detectors, fire sprinklers, burglar alarms, and security cameras, can reduce the risk of property damage or loss and may result in lower premiums.
Review the policy annually
Regularly reviewing the policy terms and conditions, coverage limits, and deductibles with an insurance advisor can ensure that the coverage and pricing remain appropriate for the business’s needs.
Purchasing multiple insurance policies from the same insurance provider, such as commercial auto insurance or general liability insurance, can result in discounted rates on each policy.
Taking steps to minimize the risk of property damage or loss, such as regularly maintaining equipment, training employees on safety procedures, and avoiding high-risk activities, can lead to lower premiums over time.
Shop around for competitive quotes
Comparing rates from multiple insurance companies can help businesses find the most affordable commercial property insurance options that meet their specific needs. By working with an insurance broker, they can compare insurance quotes from several top insurance providers on your behalf, helping you find the best coverage and price more quickly. Call us today if you have any questions about the type of business insurance quote information you'll want to prepare for your free, accurate quote!
Contact BrokerLink today
You can reach us by phone, email, or in person at any one of our locations throughout Canada. Our experienced commercial insurance advisors will guide you with the right business insurance questions to determine the appropriate level of property insurance coverage for your business needs. We conduct the research for you, obtain competitive quotes, and ensure that your business property has exceptional coverage at an affordable price.
With the right commercial property insurance policy, you can quickly resume your business operations after experiencing property loss. Our knowledgeable insurance advisors at BrokerLink are available to help you find the most suitable policy for your business.
So no matter how you contact us, a BrokerLink insurance advisor will be happy to assist you. We also encourage you to take advantage of our free online quote tool to provide a competitive quote in minutes.
FAQs for commercial real estate insurance
What insurance do I need for a commercial property?
Commercial insurance safeguards you against unexpected incidents and risks that you may encounter while running your business. Fortunately, our experienced insurance advisors are equipped with the right set of questions to help you acquire the suitable coverage that shields you against potential risks that may arise unnoticed.
What is the difference between commercial and residential property insurance?
Business owners and homeowners share common risks such as fire, vandalism, water damage, and theft, but they have different financial liabilities, legal requirements, and tax considerations to factor in. Regardless of the type of business, it is advisable to conduct thorough research to determine the appropriate commercial insurance coverage to protect against potential damages, liabilities, and cybersecurity threats.
What insurance do I need for a small business?
It depends on the nature of your business. For instance, the insurance needs of a hairdresser are different from those of a contractor, and insurance needs for retail businesses differ from those of restaurants. When seeking insurance coverage for your small business, it is advisable to engage a broker who can help you understand the most suitable insurance options for your business. The broker will provide insight into what type of insurance coverage is ideal for your business based on its specific needs.
How does commercial insurance work?
Commercial insurance covers a business against financial losses resulting from unexpected events such as property damage, liability claims, and business interruptions. The policyholder pays a premium to the insurance company, and in return, the insurer agrees to pay for covered losses up to the policy limits. The coverage and cost vary based on the type of business, industry, and risk factors associated with the business operations. To obtain suitable coverage, working with an experienced insurance advisor who can assess the business’s needs and recommend the appropriate coverage options is essential.
How much does commercial insurance cost in Ontario?
The cost varies depending on several factors, including the type of business, the level of risk, the coverage limits, and the deductible. Each business has unique insurance needs, so it is best to speak with an insurance provider to receive an accurate quote for your business insurance needs. However, the cost of commercial insurance can typically range from a few hundred to several thousand dollars per year, depending on the factors mentioned above.
Does business insurance cover a product or service that causes injury, illness or death?
It is crucial for every business owner to have general liability insurance to safeguard against any bodily harm or property damage to third parties. In addition, depending on the nature of the business, product and completed operations, liability can also be added to the policy as an extra form of coverage. This additional coverage can offer protection against customer claims made for any harm caused by products or services offered by the business after the sale.
If you have any questions, contact one of our local branches.
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