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Updated Aug. 30, 2024
Insurance, as a means to protect ourselves and our assets, can be used in a variety of ways. For personal reasons we may want to protect our homes (usually our most expensive asset) from damage, theft, fire etc. We may also want to protect ourselves from lawsuits in case we cause damage, or someone is damaged on our property. The same logic can be applied to car insurance.
But what if you own other assets for your business, for example? Or through investment? If you are an owner in commercial property, you’d want similar protections that will prevent loss and/or damage. This type of property can include income or real estate investments, office towers, and buildings that are meant to generate a profit from capital gains or rental income, as opposed to your home.
Commercial property insurance is used to cover commercial property from similar perils that may occur to your home – like theft, fire, and natural disasters.
Commercial property insurance coverage varies from policy to policy, but commercial property coverage is classified by the type of event leading to a loss and by what things are insured. The most basic commercial property insurance covers any losses caused by fires or explosions, theft, vandalism and damage from vehicles or airplanes. Additional coverage (also known as endorsements) can provide additional protection for damage such as, broken glass caused by an earthquake.
The key items insured in commercial property insurance includes the following:
It is very important for you to take an inventory of your business before you apply for commercial property insurance. This helps you decide what property you want to insure and its overall replacement value.
While commercial property insurance can help reduce risks or replacement costs on certain things, there are reasons that you would not be covered as well. For example:
We all try to work and live in a collaborative manner that is fair and equitable. But there are some bad apples that, for better or worse, we must protect ourselves from.
Let’s say you own a retail business with a warehouse full of inventory. The inventory is valuable to you and to your customers. Commercial property insurance will allow you to protect yourself from the risk of a covered loss like theft, fire, or damage, for example, to your goods. Should something happen to your inventory, or property, it may take you time to stock up again, but at least you will have had the financial protection to do so.
That’s just one scenario where commercial property insurance can assist. If you own and operate equipment or machinery that is damaged, insurance will help replace that and prevent your business from losing too much money due to any time lost in the replacement process
Commercial property insurance plans pay for losses based on the replacement cost of each item or its actual cash value.
Replacement cost: Replacement cost (RC) is the amount necessary to repair or rebuild the property on the same premises, with comparable materials and quality, without deducting any amount for depreciation.
Actual cash value: Actual cash value (ACV) is the cost to replace it with new property of quality, minus depreciation.
Generally, premiums for policies covering property insured on an ACV basis are lower because the limits include the depreciated value. This amount might not be enough if you elect to insure the property on a RC basis.
Commercial General Liability insurance (CGL) protects a business from any third-party legal lawsuits that threaten the company with financial loss.
CGL insurance protects companies and small business owners from:
Premises or operations coverages protect businesses in the event of someone filing a claim due to an injury. This type of general liability insurance is only for third party claims. When an employee files an injury claim, it comes under worker’s compensation insurance and not CGL.
CGL insurance also covers businesses if individuals file a claim for any damages that take place off the premises. For example, general liability insurance will protect your assets if someone is injured while using a product with faulty part, made in your factory.
Excess liability and umbrella coverage provides small businesses with an extra assurance of protection if they are sued on multiple fronts or need to pay any damages beyond the limitations of a standard CGL insurance policy.
CGL insurance also protects employees acting in an official capacity. It covers your corporation’s executive officers, stockholders and directors when they are acting on the behalf of your business. In joint ventures and partnerships, it covers the official actions of partners, members and their spouses.
Most importantly, CGL insurance allows a business to survive as an entity. Please note that some companies may present a higher hazard liability exposure that requires specialized underwriting.
Common deductibles include:
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Commercial property insurance protects your business's physical assets, including its building, furniture, equipment and inventory from damages caused by:
For example, if your property is affected by a municipal gas leak, your commercial property insurance can help you cover the cost of repairs, making it easy for you to return to business.
Commercial property insurance may cover the damage to your property, but what if your business causes damage to your neighbor’s property?
If your company operations causes the damage, you can be liable for it. This is why it is vital for some businesses to get business liability insurance along with commercial property insurance.
Business liability insurance helps you address the responsibilities you have to the people who come in contact with your business and its operations. These people include:
Landlord insurance covers a property owner from financial losses on their rental properties. There is usually coverage for the building, contents and liability.
Commercial property insurance, on the other hand, is for larger businesses that can help protect a building, contents from perils such as fire and theft. It can also include equipment coverage, and depending on your policy, can be paired with business interruption coverage, which will protect you from financial losses in case you have to halt operations for a period of time.
The short answer is no. Landlord or rental property insurance is specifically for houses, condos etc. That you rent to others. It also protects your liability should a tenant or others put forward a claim against you due to negligence, mishaps, or accidents as the landlord and property owner.
The cost of your commercial property insurance policy will depend on the size and nature of your business. A small business can pay as low as $425 a year, while a mid-sized company can pay anything from $1800 to $10,000.
Most landlords require or want their tenants to have commercial tenant insurance. In most cases it covers legal liability for lawsuits and other claims related to third-party bodily injury and property damage in the rented space.
Joel Kranc is a freelance writer and content provider who has worked with RATESDOTCA since 2019. He holds an MA in political science from the University of Toronto and a film certificate from New York University.
He has been published in and worked for such companies as CNN, Rogers Media, Institutional Investor Magazine, The Globe and Mail, Infrastructure Investor, BenefitsPRO Magazine, Global Finance Magazine, With Intelligence, the CPP Investment Board, Hospitals of Ontario Pension Plan, and many more financial services and industry publications.
He is the author of "Retirement Planning in 8 Easy Steps," which, when released in 2015, was No. 11 on the Publisher's Weekly US Bestseller List for Business and Finance, beating out Mark Cuban's "How to Win at the Sport of Business."
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