Commercial Property Insurance

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Types of Commercial Property Policies 

There are three types of commercial property policies in Texas. The policies protect against different causes of damage, known as “perils.”

• Basic form policies cover common perils like fires and storms.
• Broad form policies cover common perils, as well as water damage; structural collapse; sprinkler leakage; and damage caused by ice, sleet, or weight of snow.
• Special form policies cover all types of perils except those the policy specifically excludes. Typical exclusions include damages from flood, earth movement, war, terrorism, nuclear disaster, wear and tear, and insects and vermin.

Replacement cost and actual cash value coverage

Most commercial property policies provide either replacement cost coverage, actual cash value coverage, or a combination of both.

• Replacement cost coverage will pay to rebuild or repair your property, based on current construction costs. Replacement cost is different from market value and doesn’t include the value of your land.
• Actual cash value coverage will pay to rebuild or replace your property minus depreciation. Depreciation is a decrease in value because of wear and tear or age. If your business is destroyed and you only have actual cash value coverage, you might not be able to completely rebuild.

Commercial Property Coverages

Commercial property policies aren’t standardized in Texas. This means coverages and policy terms will vary by insurance company and by policy. If a policy doesn’t provide all the coverage you need, you can usually buy endorsements to add or increase coverage. Endorsements usually raise your premium.

The following are some typical commercial property coverages:

• Building occupied by the insured coverage insures a building that you regularly use but don’t own. This coverage can be important if you lease or borrow a building.
• Newly acquired or constructed buildings coverage insures a new building if you add it to your policy within a certain amount of time. If you don’t tell your insurance company within the time period — usually 30 days — your policy won’t cover the new building. Commercial property policies usually only cover buildings named in the policy.
• Employees’ personal property coverage insures your employees’ personal property if the property is on your premises. Generally, you must buy this coverage as an endorsement if you need more than a limited amount.
• Off-premises property coverage covers your property located off site. If a policy doesn’t cover off-premises property, or provides only limited coverage, you might need an endorsement or a separate policy to cover it.
• Business interruption coverage pays for the income you’d lose if your business is damaged and you can’t perform your normal business operations.
• Extra expense coverage pays any additional costs to return your business to normal after it’s damaged.
• Valuable papers coverage provides limited coverage for your business records and other valuable papers. You might be able to increase the coverage amount with an endorsement.
• Ordinance or law coverage pays additional costs to repair or rebuild a facility to current building codes after it’s damaged. Many policies provide limited ordinance coverage, but you can increase the coverage with an endorsement.
• Boiler and machinery coverage covers boilers, air conditioning units, compressors, steam cookers, electric water heaters, and similar machinery. Coverage is usually only for machinery listed in the policy and to losses caused by malfunctions of boilers or machinery, such as when a boiler explosion or water heater leak causes damage to other property. You can buy this coverage as an endorsement or a separate policy.
• Inland marine coverage insures goods in transit by land, air, or inland waterways. It also covers projects under construction and transportation and communications structures, such as bridges, tunnels, and communications towers.

Commercial multi-peril (CMP) policies combine several coverages – such as commercial property, liability, inland marine, and commercial auto – into a single policy. It’s usually cheaper to buy a CMP policy than to buy the coverages individually. Business owners (BOP) policies combine property and liability coverage in one policy. BOP policies are primarily for small businesses.

Other Coverages to Consider

Crime Coverage

You can buy several types of coverage to protect your business from crime. These are some of the common types of crime coverages.

• Loss of glass and money due to theft pays for damage to glass and for a theft of money resulting from a break-in.
• Robbery and safe burglary (property other than money) is a more limited form of coverage that doesn’t include a loss of money or securities.
• Forgery or alteration protects your business against forgery or alteration of checks, drafts, promissory notes, or other types of payments.
• Theft, disappearance, and destruction coverage insures money, securities, and other property against losses, both on your premises and off premises in the custody of an employee or messenger.

This information provided by Texas Department of Insurance www.tdi.texas.gov