Buying Tips:

Commercial Property Insurance

Deductibles – If you can afford it, it makes sense to take higher property deductibles. Property insurance usually does not have a frequency of losses. A larger deductible that the company can afford will allow you to “sleep at night” knowing that the big events will be covered. Higher deductibles can greatly reduce the cost of insurance.

Business Income Coverage – This is an undersold coverage, which replaces continuing expenses and the firm’s profit plus extra expenses incurred to keep the business going. In addition, rents are covered in this form, if the exposure exists, subject to the limit of liability chosen. This coverage is only paid if a covered property is damaged prior to the Business Income loss. A large percentage of businesses without this coverage never reopen following a loss.

Special Form (used to be known as “All risk”) you want this broad coverage, which covers all perils, unless specifically excluded.

Replacement Cost – Forget what the marketplace will pay you for your building – if you have a fire, for example, you need the building to be rebuilt. You need to insure the cost to rebuild your building with today’s costs for labor and materials.

Coinsurance – You are expected to insure your property to at least 80% of value (90% for replacement cost). Failure to insure to value will result in a “coinsurance penalty”. This means that even smaller loss payments will be penalized by the percentage of current insurance vs. the limit that should have been carried.

Agreed Amount – Eliminates the coinsurance clause. A “Statement of Values”, has to be completed, which is form signed by the insured, which states the values of the building, contents/stock and business income. This greatly eases loss settlement since the carrier agrees up front what the property is worth.

Major Commercial Property Coverage Form Exclusions:

1. War
2. Nuclear
3. Maintenance
4. Flood and Earthquake
5. Vermin