Commercial Property Insurance: Choosing the Right Fit for Your Construction Business

As the name implies, commercial property insurance protects your company’s physical assets—your buildings and their contents—from perils such as fire, storms, theft and vandalism.  This is true whether the property is owned or leased. 

What assets are usually covered? 

In addition to your building and its contents such as inventory and machinery, a property policy can cover:

  • Computers and other electronic equipment
  • Expenses due to loss, such as renting a new location during repairs
  • Fixtures, furniture & supplies
  • Intangible property
  • Leasehold improvements 
  • Signs, fences, and other outdoor property within 100 feet of the building
  • Valuable documents 

What is typically excluded?

Every policy is different and can be endorsed to include additional coverage. However, property insurance typically does not cover:

  • Money & securities
  • Vehicles (subject to motor vehicle registration)
  • Damage caused by crime, flood, earthquake, terrorism, wind 

So, if a vendor visiting your office trips and breaks their cell phone, that would not fit the scope of property insurance. Another situation that would not be covered is damage that a disgruntled employee intentionally makes to your business property.

What are the implications of not having coverage?

Choosing to operate your contracting business without Commercial Property insurance is a risky endeavor. One fire could shut you down for the foreseeable future. Having this policy in place secures the stability of your business.

There are aspects of property insurance that can go beyond your own building and personal property. For example, you may be a contractor that receives monthly shipments of materials from an outside vendor. If that vendors’ building burns down and they are shut down for months while they rebuild, it will affect your ability to complete your work. Property policies can include business interruption (BI) coverage & dependent BI coverage. 

How does a policy work and how long should you carry coverage?

You can create a separate Commercial Property insurance policy for each location and each type of property. You can also choose a blanket policy covering more than one type of property at the same location, or for the same type of property at multiple locations. You will need coverage for as long as you own (or rent) the property.  

How do I choose the right amount of coverage? 

If you own your building you will need to determine the cost to rebuild. Many confuse this concept with the concept of market value, but you should focus on how much it will cost to get it back to where it was. If you have a loan on the building, you will be required to have Commercial Property coverage as collateral. Premiums are based on the property’s COPE (construction, occupancy, protection, and exposure characteristics).

What happens if your business situation changes?

Your policy will need to grow as you acquire property and assets for your business. Whenever a change in property is made, get an appraisal so you know the current value. Likewise, regularly review the physical contents of your properties.