Commercial property insurance: What it is and when you need it

Commercial property insurance protects your own business assets in the case of damage or loss, but to what extent depends on your policy. Use this guide to learn about commercial property insurance.

May 7, 2020

What is commercial property insurance?
Named peril vs. comprehensive policies
What commercial property insurance can’t cover?
Doesn’t my insurance already cover that?
Small business insurance

As a small business owner, you’ve put so much into your businesses. Yes, we mean your blood, sweat, and tears—as well as the money and care that have gone into choosing a physical location, outfitting it with specialized equipment, and creating signs and marketing materials. Now, your place of business is your home base. That’s why it’s so important to protect the investments you’ve already made in terms of time and money.

No matter how careful you are, though, there’s always the chance that your business property can be damaged—either by natural disaster, vandalism, or sheer bad luck. If that were to happen, would you be covered? That all depends on your commercial property insurance policy.

Ready to learn everything you need to know about this kind of insurance? Let’s go!

What is commercial property insurance?

Commercial property insurance is a kind of insurance that covers first-party property. What’s first-party property? That’s your property. As opposed to general liability insurance, which can help cover damage to your clients’ and third parties’ property, commercial property insurance protects your own business assets in the case of damage or loss.

Also called commercial building insurance, this kind of policy can help cover your building and everything inside it. Depending on the specifics of your policy, commercial property insurance can provide coverage for damage to the following:

The building’s exterior – Say you’ve bought a building to run your business out of. Should something damage your exterior, you would be liable for the cost of the repairs—unless you have commercial property insurance. (If you rent your building, consider a renter’s insurance policy.)
What’s inside you building – Whether you rent or own your place of business, you have valuable business equipment inside. From your computer to specialized equipment and tools, your property needs to be protected in case of damage or loss.
Signs on the premises – You advertise through custom signs. Without insurance, should these signs be damaged, you could be responsible for the cost of their replacements.
Equipment used to maintain the premises – You may have a lawnmower, pressure washer, or another piece of equipment that you use to maintain your workspace. This is a business asset, too.
Business interruption due to a direct physical loss – Should physical damage to your building or equipment prevent you from conducting business, commercial property insurance could help cover the costs associated.

As you can see, commercial property insurance can cover a wide range of property. But what kinds of damage are covered? That depends on the specifics of your policy. Next, we’ll take a look at common kinds of commercial property insurance.

Named peril vs. comprehensive policies

Commercial property insurance often takes one of two forms: named peril coverage or comprehensive coverage. Named peril coverage only covers damage from the specific perils that are named in your policy, whereas comprehensive coverage can cover a wider range of scenarios.

Let’s take a look at each:

Named peril insurance

Named perils insurance names the perils that it covers, just like its name suggests. There are typically sixteen named perils:¹

Fires and lightning
Wind and hail
Explosions
Riots and civil unrest
Damage from an aircraft crash
Vehicular damage
Smoke
Vandalism
Theft
Falling objects
Weight from ice, snow, or sleet
Overflow of water or steam
Sudden damage to water or air systems (cracking, bulging, etc.)
Damage from freezing
Artificial electrical damage
Volcanic eruptions

A named peril policy kicks into gear when one of the perils affects your business or property. For example, a lightning strike that damages your roof would activate your commercial property policy. Likewise, theft of your computer system would be covered.

Comprehensive coverage

If you believe your business faces potential property loss or damage for any scenario not included above, you may be interested in comprehensive coverage. Some example scenarios include:

Flooding
Other natural disasters (earthquakes, etc.)
Damage due to mold
Vermin
Military action
Power failure
Defects in your building or property

If you believe you’re at high risk for a scenario like the above, or any other scenario we haven’t mentioned, you may be interested in comprehensive coverage.

Is there anything that commercial property insurance can’t cover?

As with all insurance policies, business property insurance can contain exclusions. Exclusions are particular kinds of risk excluded from your insurance policy. Some common exclusions include²:

Damage that could have been avoided, i.e., breakdown of old equipment
Business interruption that is not due to a specific physical damage, i.e., business interruption as a result of a government mandate

Some kinds of property:

Vehicles
Building foundations
Cash and monds
Crops
Animals (other than livestock)
Data
The cost of excavation

Make sure you understand the specifics of your policy to see what is excluded. In addition, take steps to cover your risk. Be sure to keep your equipment up to date. In addition, take out specific insurance for your vehicles (auto insurance or boat insurance), and for your data (cyber insurance).

Doesn’t my insurance already cover that?

Unless you already have a commercial property policy, your building and property are not covered.

Confused? It all comes down to the difference between a first-party policy and a third-party policy. You may already have one or both of the following kinds of insurance:

General liability insurance – which protects against client and third-party claims of personal injury, advertising injury, bodily injury, and property damage, not your own.

Professional liability insurance – also called errors & omission insurance (E&O), which protects against client and third-party claims of errors, mistakes, and negligence in your work.

As you can see, these policies both protect against client and third-party claims. To protect your own property, you need a first-party policy.

Small business insurance: protect yourself from all angles

As a small business owner, your goal is to grow the seeds you’ve already planted—and, of course, to protect your business against risk. To cover yourself from every angle, it’s important to guard against client and third-party claims, and of course to protect your valuable business property, too. That’s why you need business insurance.

Thimble offers revolutionary on-demand general liability insurance and professional liability insurance.

What is on-demand insurance? It’s insurance that works when you do—choose from hourly, daily, or monthly policies. To protect yourself against risk of client and third-party claims at your place of business (and beyond), select “Get a quote” or download the Thimble mobile app. Just enter a few details, review your quote, and click to purchase—in under 60 seconds, you’ll be insured.

Likewise, protect your commercial property from damage with commercial property insurance. Choose a named peril policy, or, to guard against a wider range of scenarios, select comprehensive coverage.

You’re passionate about your business. At Thimble, we’re passionate about making insurance easy, so that businesses like yours can thrive.

Sources:

Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.

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