Commercial Property Insurance Policies

As its name suggests, the commercial property policy is the foundation of a commercial property insurance program.

Coverage policy provides:

• Commercial property policies are designed to provide insurance on existing buildings and their contents. A business purchases this type of policy to respond to loss or damage in connection with its own facilities. Despite their importance, commercial property policies contain some limitations and exclusions that make the purchase of additional policies advisable for most businesses.

Important points to discuss with your agent:

• Commercial property policies are principally designed to cover existing, completed buildings and property that is enclosed within them. They provide very little coverage on property that is in transit or at locations other than those that are scheduled in the policy as covered locations. For these and other reasons, buildings under construction are usually best insured under a separate builders risk policy, and the equipment that used by a business away from an insured premises is usually best insured under a separate inland marine policy.

• Nearly all commercial property policies exclude loss due to employee theft. A separate commercial crime policy or bond is needed to provide coverage for this loss exposure. Similarly, most commercial property policies exclude loss due to equipment breakdown. Equipment breakdown (also know as Boiler & Machinery) coverage is usually purchased under a separate equipment breakdown policy.

Losses covered:

• Commercial Property insurance covers losses that result from certain covered causes (also referred to as “perils”). There are three different types of loss forms a commercial property policy may be written on.  A business has the choice of either Basic, Broad or Special Cause of Loss Forms.  The Basic & Broad Forms cover only losses that are caused by the perils that are specifically listed in the policy as covered.  Special forms, on the other hand, cover losses from all causes except those that are limited or specifically listed in the policy as excluded. 

Losses not included automatically:

• The “perils” Flood, Earthquake and Building Ordinance Enforcement are just of few of the types of losses that are NOT covered under either of the above cause of loss forms. If the insurance company agrees and the business is willing to pay additional premium, then these types of perils can possibly be added to the Commercial Property policy.