What is Business Property Insurance?
Murphy’s law says that anything that can go wrong will go wrong.
I don’t know about you, but putting the future of my business in Murphy’s hands doesn’t sound like my idea of a good time. I’m sure you’ve heard a thousand times over the importance of preparing for the unexpected.
While this is excellent advice, it’s missing one thing — HOW to prepare for the unexpected.
Business property insurance is one way you can protect and prepare your business, employees, and overall operations for whatever life (or the environment) decides to throw at you next.
If you’re nodding your head, thinking, “That sounds great!” but you’re unsure what it is, what it covers, and what it doesn’t… you’re in the right place. You’ll know exactly what it is and how to find the right policy for your business in a few short minutes.
So, let’s get started!
An Introduction to Business Property Insurance
Business property insurance provides coverage for any business assets you own (or rent) if something happens to it. Let’s look at a quick example.
You own several warehouses you use to store inventory, tools, and other business equipment when you’re not using it. Someone decides to bust a window in the middle of the night and run off with a few thousand dollars in inventory.
In a situation like this, business property insurance helps cover the cost of replacing what was stolen and the damage caused by the theft (i.e., a broken window). Without it, you’d be stuck paying for everything out of your pocket.
How Does Business Property Insurance Protect a Business?
If anything happens to (or on) your business property (i.e., it gets stolen, broken, or destroyed), business property insurance helps cover the costs of repairing and replacing it. This includes coverage for expenses like:
- Fires, smoke damage, and water damage
- Explosions, pipe-bursts, and severe weather
- Theft and commercial property damage that occurs as a result of it
- Lost revenue caused by a loss covered under your policy
Note: If you’re like many Americans running your business from a home office, homeowner’s insurance isn’t enough. A home policy doesn’t cover things like your laptop or other business-related equipment/files.
Furthermore, it doesn’t cover anything housed outside your home (like your office). Business property insurance helps fill this gap by covering all of your business-related belongings and commercial property regardless of where the property is damaged or destroyed.
Who Needs Business Property Insurance?
All business owners should carefully consider purchasing business property insurance, especially if you own or rent anything essential to your business’s continued operations.
Furthermore, if you’re not prepared to pay for damages from your pocket, a business property insurance policy can help reduce the financial burden. This coverage could make the difference between shutting your doors forever… or keeping them open.
Accidents, disasters, and shady people happen all the time, usually because of factors outside your control. And if you’re like most business owners, the life (or theoretical death) of your company isn’t a risk you’re willing to leave to chance.
What Does Business Property Insurance Cover?
Specifics of your plan vary depending on the company and policy you choose. It’s essential to understand what most business property plans cover so you can make sure your business is fully protected regardless of the situation.
Generally, business property insurance policies cover physical assets on your business property. In a nutshell, this includes your building, equipment, inventory, and anything else on site. More specifically, coverage includes:
- Business personal property – this could be yours, an employee’s, a visitor’s, or a customer’s
- Computers, phones, printers, and other technology you use for your business
- Lost income as a result of business interruption
- External property like signs, fences, sheds, or warehouses
- Furniture & fixtures – desks, chairs, couches, rugs, tables, etc.
- Product inventory housed on your business property
- Equipment, tools, or other heavy machinery
- Important documents and records
Furthermore, these insurance policies typically cover damage caused by theft, vandalism, hail or wind, fire, water damage, explosions, bursting pipes, natural disasters, and the lost business income that occurs as a result.
What Doesn’t Business Property Insurance Cover?
Although business property insurance covers numerous things, it’s essential to understand what isn’t usually covered so you have a clear picture of what to expect from your policy.
It’s also worth noting that many insurance policies don’t cover damage caused by earthquakes or floods unless they’re specifically added to the policy. You may want to seek additional coverage depending on where you live and the risk these disasters impose on your business.
Further, there are particular circumstances that aren’t usually covered. These situations include things like:
- Theft or damage that occurs anywhere other than your place of business
- Any situations that happen while your commercial property is in transit (inland marine insurance)
- Commercial property damage or bodily injury to third-party (see general liability insurance)
- The damage you or your employees cause on purpose
- Negligence claims (see professional liability insurance)
- Damage or theft to company vehicles
- Car accidents
How Much Does Commercial Property Insurance Cost?
The average cost of business property insurance across all industries is $63/month. That said, most small business owners (42%) can expect to pay between $500 – $1,000 every year.
Furthermore, you may be able to bundle multiple policies together in a Business Owner’s Policy (BOP) at a discount, depending on the insurance company.
How Is Business Property Insurance Calculated?
Not all business properties and locations are created equal. So, your monthly insurance premium may vary based on numerous factors, including:
- Size of the commercial property
- Risk factors associated with the location
- How old the building is
- Property security
- Type of equipment you have
- How old the equipment is
- What’s covered in your policy
- The replacement value of the commercial property
Old buildings or large buildings with a lot of heavy machinery cost more to insure. And small businesses in areas with high crime rates or harmful environmental factors are more expensive to cover.
Policies will also be based on one of two factors: Replacement Value or Actual Value. Replacement value is based on the cost of buying a brand-new replacement for a lost or damaged item, while actual cash value is an item’s current market price, with depreciation taken into account. Actual cash value policies usually cost less because the loss payout is lower than the replacement value.
It’s also a good idea to have a disaster prevention plan and appropriate security measures in place to prevent damage and theft from occurring in the first place.
How Do I Get Business Property Insurance?
Whether your business is brand new, upgrading to a better location, or currently running smoothly, it may be time to evaluate business property insurance coverage. Most insurers will first want to learn more about your business and your specific property coverage needs before getting a quote.
But, choosing the right plan and insurer is often the hardest part. Your current insurance can likely provide a quote, and insurance comparison sites like CoverWallet make it easy to get personalized quotes from the top insurers in your area and industry.
From there, you can see premiums, property coverage options, and more from the best plans in the industry tailored to your business and your specific needs so you can choose the perfect fit for you and your business.