Commercial Property Insurance – Do You Have Enough Coverage?

August 8, 2013      

Does your standard commercial property insurance policy offer you the best possible protection? It might not. There are plenty of gaps in a standard policy. And these gaps can come back to haunt commercial real estate owners. Here are some of the best ways commercial owners can fill these gaps.

As a commercial property owner you are obligated legally, financially and contractually to purchase and maintain property and liability insurance on your building. So, there is likely coverage in place. However, many policies have gaps in coverage.

What are some of those overlooked aspects?
A lot of questions focus around the coverage that is referred to as business income or business interruption coverage. A property owner will buy a standard property policy to cover them against unforeseen events, storms, tornadoes, fires, the classic insurance coverage scenarios. If your commercial property is destroyed, the standard coverage will pay to replace the property itself, the property owner is still losing the income generated by its operating tenants during that renovation. The owner has to pay contractors to clear the site. The owner has to handle the costs of gaining permits. This is all commonly overlooked. Business owners need a policy in which the income they are forfeiting is included in the overall coverage. Owners need protection while the property is getting up and running again and beyond. Commercial policies can be provided for up to a year after the property has been rebuilt which can provide you income coverage as you are leasing up space.

Are there any other gaps owners should be aware of in traditional commercial property policies?
Flood protection is often misunderstood. You can be far away from a body of water and still suffer flood damage. An insurance broker should determine a property’s real exposure to possible water damage and provide protection against it.

Do owners understand that their standard policies might have coverage holes?
Most are unaware of the nuances in coverage. Typically, property managers are educated to bid insurance like they bid on a landscape contractor or snow removal. They don’t look at much beyond the quoted premium price. There is the assumption that insurance is a commodity that you buy it like any other commodity. It’s like auto insurance. You have auto insurance but no one likes to talk about it.

What can happen to property owners if they don’t shore up their coverage?
The common fear is that they’ll get a denial of coverage. Property policies have become fairly standardized so you don’t see total exclusions. The real cost to not having the right policy comes after a loss. You might think you are saving money because you are paying a lower premium. But at the end of the day because you don’t have the right protection, you are forfeiting income. What you end up paying has far exceeded what would have been a slightly higher premium.

To have your commercial insurance reviewed, contact TriState Business Insurance.

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